European shares set a five-week closing high on Friday, led by miners tracking stronger metal prices and investors positioning themselves for an expected positive start to the US corporate results season next week. The pan-European FTSEurofirst 300 index of top shares closed up 0.4 percent at 1,148.45 points, above its 50-day moving average, after ending below it on Thursday when investors took profits on concerns about an aftershock in north-eastern Japan.
But the trading volume was only 88.8 percent of the 90-day average. "The next big thing is the US earnings season," Matt Brown, trader at Catalyst Markets said. "If we want the market to have further momentum we need the upside surprises to continue, otherwise investors may step away."
The earnings season will begin with Alcoa Inc after the market's close on Monday, while J.P. Morgan Chase & Co and Google Inc are due to report later in the week. Precious metal and copper miners were in demand on Friday as gold hit a record high after the dollar weakened on the prospect of a US government shutdown and copper hit its highest in a month on expectations of increasing demand.
Precious metals miner Fresnillo gained 2.4 percent, while copper miners Kazakhmys and Xstrata were up 1.9 percent and 2.8 percent respectively. Elsewhere, insurance stocks rose as investor's turned their attention back to Thursday's European Central Bank first interest rate rise since the 2008 financial crisis to curb rising inflation.
"The companies which will benefit from higher interest rates are prominently financials - in particular insurance groups, and especially life companies," Parus Shah, manager of the 93 million euro ($133.9 million) Fidelity Funds European Special Situations portfolio, said. "Insurance companies do well because their investment business benefits from the rise in the yield curve. I currently hold two insurance companies - Allianz and ING." The STOXX Europe 600 insurance sector index gained 1.1 percent to feature among the best performers, also helped by a UniCredit recommendation to go long on insurers. Swiss Life, Allianz and ING Groep were up 1.1 to 3.5 percent.
However, fund managers said although Portugal's request for a bailout had been taken positively debt problems facing the eurozone peripheral countries had not gone away, with the market expecting further ECB interest rate rises. "The problems facing the periphery are likely to reappear at some point, in spite of the better near-term sentiment. With inflation also likely to remain above target," said Martin Harvey, manager of the Threadneedle Global Bond Fund which has 306 million pounds ($501.4 million) of assets under management. But traders put these concerns in the background, with Spain's IBEX 35 rising 0.6 percent and Italy's benchmark gaining 0.7 percent, but Portugal's PSI 20 was flat.
Across Europe, the FTSE 100 index was up 0.8 percent, Germany's DAX was 0.5 percent higher and France's CAC 40 rose 0.8 percent. On the downside, Dutch logistics group TNT dropped 12.6 percent after doubts were cast over the outlook for its express unit it aims to spin off.