By Amanda Cooper
LONDON, May 2 (Reuters) - The financial sector fuelled a
rally in European shares on Friday, which scored their third
weekly gain, after U.S. jobs data suggested the world's largest
economy was proving more resilient than expected.
Banks and other interest-rate sensitive stocks such as
insurers were among the largest positive influences on the
European market, after the U.S. April jobs report showed a
smaller contraction than expected in the labour market and a
measure of manufacturing activity beat forecasts.
Spain's Banco Santander <SAN.MC> rose 4 percent, making it
the top individual positive weight on the market, while
Telefonica <TEF.MC> rose 3.3 percent as Spanish stocks with big
exposure to Brazil got a boost from news that Standard & Poor's
raised its rating on that country to investment grade.
Other banks on the move included Royal Bank of Scotland
<RBS.L>, UBS <UBSN.VX> and BNP Paribas <BNPP.PA>, which rose
between 3 and 5.6 percent.
Auto stocks and other exporters such as luxury goods
manufacturers got a boost from a drop in the euro <EUR=>, which
fell against the dollar following the U.S. data, while other
industrials were supported by a fall in the price of crude oil
<CLc1>.
The FTSEurofirst 300 <> index of top European shares
rose 1.67 percent to 1,361.36 points, bringing the gain for this
week to 2.6 percent, the third weekly rally in a row.
"(Payrolls) makes you think, along with the ISM data earlier
this week, that perhaps life is not getting worse. It may not be
brilliant, and housing market data from CaseShiller was pretty
grim, but the second half of the week has given an indication
that things are not getting worse," said Philip Isherwood, a
strategist at Dresdner Kleinwort.
"The equities market looks forward and you can build a
plausible optimism on that."
The FTSEurofirst index rose 6 percent last month to record
its best monthly performance since late 2003 as corporate
results came in better than investors feared.
The index is still down 10 percent on the year, however,
weighed down by the fallout from the global credit crisis and
the extent of its impact on the U.S. economy in particular.
Beyond the banks on Friday, French insurer Axa <AXAF.PA> was
up 3.9 percent, while Germany's Allianz <ALVG.DE> was up 2
percent and Swiss Re <RUKN.VX> 1.7 percent. In London, Old
Mutual <OML.L> gained 5.2 percent and Aviva <AV.L> 4.5 percent.
The euro fell to around one-month lows against the dollar,
helping support the auto sector where French carmaker Renault
<RENA.PA> gained 6.2 percent and Peugeot <PEUP.PA> rose 3.2
percent after data showed strong French car sales for the
company in April and after Nissan <7201.T>, in which Renault has
a significant stake, reported resilient U.S. April sales.
Germany's BMW <BMWG.DE> gained 3.9 percent, while Daimler
<DAIGn.DE> rose 0.8 percent.
The broad-based rise in the dollar kept crude oil below $115
a barrel, yet BP <BP.L>, Royal Dutch Shell <RDSa.AS> and Total
<TOTF.PA> rose between 0.3 and 1.1 percent as ongoing support
from BP's and Shell's results this week buoyed the sector.
Airline stocks rallied, thanks to softer oil prices and
British Airways <BAY.L>, which said late on Wednesday that it
was in talks with two U.S. carriers over a potential alliance.
Air France-KLM <AIRF.PA> added 4.7 percent, Lufthansa
<LHAG.DE> gained 3.7 percent, while British Airways rose 2.4
percent, adding to the previous session's 7.3 percent rise.
Budget airlines Ryanair <RYA.L> and easyJet <EZJ.L> gained
5.7 and 4.6 percent respectively.
Ericsson <ERICb.ST> dropped 4.8 percent, losing some of its
post-earnings lustre as investors focused on how much the
telecom equipment maker has reaped from intellectual property
rights (IPR) sales.
Lehman Brothers, which issued a note on Friday about the
impact of IPR sales, said a little more than 3 percentage points
of Ericsson's first-quarter gross margins came from parent
company financials rather than underlying operations.
Stripping that out, the margins declined in the quarter,
Lehman said. Nokia <NOK1V.HE> lost 1.4 percent.
Mining shares gained ground, with <RIO.L> up 4.6 percent
after an Australian newspaper cited Rio Chairman Paul Skinner as
saying a break-up of his company was an option to extract the
best return for shareholders.
BHP Billiton <BLT.L>, which has made a takeover offer for
Rio, was up 4.8 percent.
Across Europe, Britain's FTSE 100 <> was up 2.1
percent, Germany's DAX <> rose 1.4 percent and France's
CAC <> gained 1.5 percent.
Next week brings rate decisions from the Bank of England and
the European Central Bank on May 8. Both central banks are
expected to leave their respective benchmark interest rates
unchanged, according to Reuters polls.
"As we look into next week, the interest rate verdicts will
be closely watched and although no changes are expected in
London or Frankfurt, any surprises would inject yet more
volatility into stocks but right now it's all looking rather
upbeat with the FTSE back at levels not seen since mid-January
and the Dow eyeing record highs for 2008," said CMC Markets
trader Dave Fineberg in a note.
(Additional reporting by Blaise Robinson in Paris; Editing by
David Hulmes)
