By Sarah Turner, MarketWatch
LONDON (MarketWatch) -- European shares closed higher Wednesday, extending gains as oil futures rallied in response to data showing tighter-than-expected U.S. fuel inventories.
The Stoxx Europe 600 Index /quotes/comstock/22c!sxxp (ST:SXXP 256.26, -0.95, -0.37%) rose 0.6% to close at 258.24, bringing its weekly gain to 0.5%.
Stocks rallied sharply last week amid signs that unemployment could be on the wane in the U.S and that Greece was acting to reduce its fiscal deficit.
Stocks have traded without much conviction this week as investors wait for more signs that the economic backdrop is improving.
Gordon Brown vows to reduce deficit
U.K. Prime Minister Gordon Brown announces a legally binding agreement between the government and the British people to reduce the deficit over four years. (Sky News)
European equities extended modest gains as oil futures rose in response to a smaller-than-expected rise in U.S. crude supplies and a big drop in gasoline supplies. Oil futures temporarily topped $83 a barrel. Read about oil market's reaction to supply data, OPEC.
Oil company shares gained, with BP /quotes/comstock/23s!a:bp. (UK:BP. 413.45, +10.95, +2.72%) up 0.9% and Royal Dutch Shell /quotes/comstock/23s!e:rdsa (UK:RDSA 1,784, -3.50, -0.20%) /quotes/comstock/23s!e:rdsb (UK:RDSB 1,713, +6.00, +0.35%) up 1.4% in London.
Signals were mixed in Europe on Wednesday, with worse-than-expected trade data from Germany that showed exports fell more than 6% in January and U.K. manufacturing output falling 0.9% in the same month. Read more on currencies.
Still, stronger-than-expected factory output data from France and Italy helped the euro erase an early loss and trade at $1.3650 against the dollar. The euro also moved off a near one-month low against the Swiss franc amid rumors Switzerland's central bank had stepped in to halt the euro's slide. Read more on currencies.
Meanwhile Chinese exports and imports grew at a higher-than-expected rate in February, helping metal futures and miners to advance. Anglo American /quotes/comstock/23s!e:aal (UK:AAL 2,541, +1.50, +0.06%) shares rose 2.3% and Rio Tinto /quotes/comstock/23s!a:rio (UK:RIO 3,355, -32.50, -0.96%) /quotes/comstock/13*!rtp/quotes/nls/rtp (RTP 52.38, -0.01, -0.02%) added 1.8%. Read story on Chinese trade data.
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On a regional level, the U.K. FTSE 100 index /quotes/comstock/23i!i:ukx (UK:UKX 5,314, -5.73, -0.11%) rose 0.7% to close at 5,640.57, the German DAX index /quotes/comstock/30p!dax (DX:DAX 6,135, -44.24, -0.72%) ended 0.9% higher at 5,936.72 and the French CAC-40 index /quotes/comstock/30t!i:px1 (FR:PX1 3,652, -18.45, -0.50%) advanced 0.9% to settle at 3,943.55.
Asian stocks ended mostly higher although Japanese stocks fell. U.S. stocks gained ground Wednesday. Read more on Asia stocks. Read Market Snapshot.
In the European financial sector, Tullett Prebon /quotes/comstock/23s!e:tlpr (UK:TLPR 344.20, -0.80, -0.23%) shares soared 25.7% after the inter-dealer broker said it's in talks over a potential takeover. It didn't name the suitor. Read more on possible deal.
Fortis shares rose 3.1%. The insurer swung to a second-half profit of 207 million euros from a loss of 635 million euros a year earlier as the group announced plans to change its name to ageas.
In the Greek banking sector, Alpha Bank shares rose 6.2%, helping the ASE Composite Index (XX:COMPO 1,708, +20.38, +1.21%) advance 2.6% to 2,139.80.
Away from financials, German utility giant E.On /quotes/comstock/11e!feoan (DE:EOAN 22.86, -0.11, -0.48%) climbed 1.4%.
The firm's net profit rose sharply in 2009 thanks to asset disposal gains, adding that it expects earnings to remain stable this year. Net income rose to 8.39 billion euros ($11.4 billion) last year from 1.28 billion euros in 2008. Read more on E.On earnings.
French auto parts group Valeo /quotes/comstock/24s!e:fr (FR:FR 27.71, +0.41, +1.50%) jumped 8.2% after it said it's targeting a return on capital employed of nearly 30% by 2013, with sales of around 10 billion euros in 2013 and an operating margin level of 6% to 7%.
Norwegian fertilizer firm Yara /quotes/comstock/29r!e:yar (NO:YAR 220.60, +4.80, +2.22%) advanced 2.3%.
The firm has been trying to buy Terra Industries of the U.S. but on Wednesday Terra said a rival proposal by CF Industries Holdings is superior to Yara's and it will end its merger deal with Yara unless it raises its offer within five days.
Sarah Turner is a markets reporter for MarketWatch in London.
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