European shares hit 1-week closing high

LONDON: European equities closed at their highest level in more than a week on Wednesday after early losses following disappointment from a Franco-German summit, with investors training their sights on company earnings and cheap equity valuations.

Strong gains on Wall Street after Target posted higher quarterly profit and Staples raised its profit outlook helped to improve sentiment, with investors returning to grab beaten-down stocks.

The FTSEurofirst 300 index of top European shares provisionally ended 0.3 percent firmer at 972.13, the highest close since Aug. 5, after falling to a low of 955.94 earlier as a summit between French President Nicolas Sarkozy and German Chancellor Angela Merkel failed to calm investor jitters over the euro zone debt crisis.

"Volatility remains the fundamental theme of the markets at the moment. But there is still a lot to be positive about, given where valuations are and as balance sheets look very healthy and companies are awash with cash," said Henk Potts, equity strategist at Barclays Wealth.

"Valuations are on single digit multiples in many developed markets and create a good, long-term opportunity."

Drugmakers featured among the top gainers after sharp declines in the previous two weeks. The sector index , which is still down more than 7 percent this month, was up 1.3 percent. Sanofi rose 3 percent after Deutsche Bank ranked the French drugmaker among 25 European "quality names" that provide good value for investors following a sell-off.

Copyright Reuters, 2011