European stocks hit their highest level in more than six weeks early today, led by oil shares as fighting between Russia and Georgia boosted oil prices, while car makers gained from a weak euro.
At 0827 GMT, the pan-European FTSEurofirst 300 index was up 0.5 pe rcent at 1,204.70 points, after having hit a high of 1,210.79, its strongest level since June 26th.
Auto stocks gained as the euro traded as low as $1.4908 after suffering its biggest one-day drop since January 2001 on Friday. The euro later recovered to above $1.50.
BMW rose 3.4 per cent, Daimler gained 2.7 per cent, while Renault and Peugeot advanced about 2 per cent.
Though oil gained $1.60 a barrel, it was still below $117, and a long way below record highs above $147 hit last month.
"The key elements of this equities rebound are the drop in both the euro and oil prices. Even the ECB seems to finally recognise that the recession in Europe is just around the corner," said Marc Touati, economist at Global Equities in Paris.
"The US economy is already getting better, while Europe's is plunging ... with hopes of rate cuts, the euro is falling, boosting the U.S. dollar, which prompts a retreat in oil prices."
Dutch mail and logistics group TNT was a standout gainer, jumping 3.5 per cent after a source familiar with the talks said US delivery company United Parcel Service was in talks to buy TNT.
Shares in Swiss bank UBS rose 4.3 per cent after it agreed on Friday to buy back $18.6 billion in auction-rate securities (ARS) whose value collapsed during a global financial crisis, and to pay $150 million to settle charges it misled investors.
Across Europe, Britain's FTSE 100 was up 0.7 per cent, Germany's DAX up 0.4 per cent and France's CAC up 0.5 per cent.
While a 21 per cent slide in crude since its July 11th high has eased inflation worries and is generally positive for equities, oil's uptick today lifted heavyweight energy shares and contributed to the FTSEurofirst's rise.
BP, Royal Dutch Shell and Total gained 1.3 to 1.8 per cent.
Miners were in focus after Kazakhmys raised its stake in rival Eurasian Natural Resources (ENRC) to above 25 per cent and Xstrata looked to raise more than £5 billion to forge ahead with a hostile bid for Lonmin.
Kazakhmys was up 2.3 per cent, Xstrata up 1.1 per cent and Lonmin flat but ENRC tanked 4.2 per cent after Kazakhmys said it had no immediate plans for a bid.
"ENRC has also been very highly correlated to the Russian market recently," said an analyst. Russian stocks hit their lowest level for two years today, unsettled by the military conflict between Russia and Georgia.
The FTSEurofirst is down 20 per cent so far this year, led lower by financials, which have been battered by a global credit crisis. But the index is up 2.1 per cent in August.
Meanwhile, US stocks opened lower today as geopolitical concerns fueled caution and oil prices rose, sparking a drop in shares.
The Dow Jones industrial average fell 52.85 points, or 0.45 per cent, at 11,681.47, while the Standard & Poor's 500 Index declined 3.91 points, or 0.30 per cent, at 1,292.41. The Nasdaq Composite Index lost 5.53 points, or 0.23 percent, at 2,408.57.
Reuters