Euro Stocks Rise Amid Bank, Energy Gains

European shares closed sharply higher on Wednesday, with banks, oils and miners rising after economic data in the U.S. proved less downbeat than forecast.

The pan-European FTSEurofirst 300 index of top European shares rose 2.5 percent to close at 811.41 points, taking its gain for the past two sessions to 4.4 percent.

"I wouldn't call this optimism, I'd call it less pessimism," said Neil Parker, strategist at Royal Bank of Scotland.

"There was a lot of trepidation about the U.S. numbers. They were better than expected, but they're still pretty catastrophic."

The U.S. service sector shrank in January, but less severely than expected. The Institute for Supply Management said its nonmanufacturing index came in at 42.9 in January compared with 40.1 in December.

U.S. private sector job losses slowed slightly in January, ADP Employer Services said on Wednesday in a report that came in slightly below economists' expectations.

Parker cautioned: "You have to be careful about the ADP employment number. That is just an effort to estimate what the (official government) payroll number is going to be on Friday."

Banks added the most points to the index. Deutsche Bank rose 3 percent on hopes that Germany's biggest bank will be upbeat about 2009 prospects when it reports fourth-quarter results on Thursday.

BNP Paribas, Barclays, Credit Suisse, HSBC, Lloyds and UBS all gained more than 3 percent.

The DJ Stoxx Bank Index rose 3.5 percent, but is still down 10 percent in 2009, having lost 65 percent in 2008.

Banks have been hit by a credit crisis that has resulted in several of them requiring a government bail-out.

Energy stocks were also among the biggest gainers in the index, with crude oil prices edging up.

Total, ENI, BP, Royal Dutch Shell, and Repsol all gained more than 2 percent.

Miners surged as gold and copper prices gained. BHP Billiton rose 9.4 percent after the company reported a 2.2 percent increase in first-half profits, aided by a last burst of Chinese demand growth.

Anglo American, Antofagasta, Rio Tinto and Xstrata were all up more than 9 percent.

But drug makers were on the slide, with Roche falling 9.1 percent after the group said it sees growth slowing this year and reported a 5 percent drop in its 2008 profit and missed expectations, hurt by a loss of Tamiflu drug sales and the strong Swiss franc.

Munich Re, the world's biggest reinsurer, unveiled a disappointing drop in premiums at the start of the year as well as a sharp fall in 2008 earnings due to the financial crisis, sending its shares down 2.9 percent. But British life insurer Aviva rose 11 percent after it soothed concerns about its capital strength and said its dividend was safe, while reporting a forecast-beating 9 percent rise in 2008 sales.

Further evidence of economic weakness in the euro zone emerged as the number of people claiming unemployment benefits in Ireland rose in January to the highest monthly level since records began in 1967, as a deepening recession spread from construction across the economy.

Across Europe, the FT-SE 100-share index closed up 1.5 percent, Germany's Xetra Dax index gained 2.7 percent and France's CAC 40-share index advanced 2.9 percent.

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