European stock markets made moderate progress on Monday after hitting a succession of 2004 lows last week as oil prices edged back from record highs.

The pan-European FTSE Eurotop 300 index closed 1 per cent higher at 950.35. In Frankfurt, the Xetra Dax was up 1.4 per cent to 3,699.11, the CAC-40 in Paris added 0.9 per cent to 3,516.68 and London’s FTSE 100 was 1.1 per cent firmer at 4,350.2.

Swatch, the Swiss watchmaking group, bounced back after US authorities rejected a discrimination claim by former employees who had made allegations of tax evasion by the company.

Swatch denied that it had broken any laws, and analysts suggested that Friday’s sharp fall in the company’s shares had been overdone.

“We believe that the market is somewhat overreacting to the transfer pricing issue at Swatch,” said Goldman Sachs. “Based on our research, we believe that this type of transfer pricing is standard within the industry.” Swatch bearer shares, which fell as low as SFr130 on Friday, rose 4.1 per cent to SFr147.25 while the registered stock added 3.6 per cent to SFr30.60.

In the same sector, German sportswear and equipment maker Adidas-Salomon rose 2.8 per cent to €105.40 after the company said it would raise its annual dividend.

The telecoms sector’s star performer in 2004, and its weakest link, both enjoyed a strong day. Tele2, down 27 per cent year-to-date, rose 3.2 per cent to SKr277.5. Its shareholders endured poor results earlier this month, followed by a reduction in subscriber targets last Friday. An analyst at one of the European banks said that with a “raft of downgrades” now in the price, the stock could offer value.

Telekom Austria, the sector’s best performer with a 37 per cent rise year-to-date, rose a further 5.8 per cent to €13.65, fuelled once again by Swisscom takeover speculation. The local press reported that Austria’s Finance Minister gave the deal the green light at a meeting with his Swiss counterpart last week.

Germany’s Allianz was among the best individual performers in the financial sectors, its shares climbing 2.1 per cent to €26.03, after interim results which included a much-better-than-expected outcome from Dresdner Bank.

Barclays Private Clients adopted a cautious line on the figures: “Although the turnaround in banking profitability indicates that Allianz is on the right track, we would note that second quarter net income of €614m was 9 per cent lower than in the first quarter whilst the general insurance pricing cycle is losing momentum”. Barclays rates the shares as “neutral”.

Reinsurance stocks had to endure increased turbulence as the market began to assess the impact on the sector of the damage wreaked by Hurricane Charley, which carved its way across Florida on Friday.

But losses across the sector were short-lived after a reassuring statement from Munich Re, the world’s biggest reinsurer. Munich said it expected to have claims in the low three-digit million euro range.

Munich Re shares traded up 1 per cent at €75.80 and Swiss Re settled 0.6 per cent up at SFr68.65.

HVB Group, Germany’s second-biggest bank after Deutsche, jumped 2.6 per cent to €13.36 after the bank’s chief executive, Dieter Rampl, was reported as saying he did not expect a hostile bid from one of its European competitors and that HVB was interested in buying fellow German bank Postbank. He also said HVB had made a good start to the third quarter. Deutsche Postbank rose 1.2 per cent to €28.80.

Deutsche Bank shares added 2.8 per cent to €54.40 after JP Morgan upgraded the stock to “overweight”.

Roche, the Swiss pharmaceuticals company, came under fire, its shares dipping a further 2.1 per cent to SFr149.25, after recent news that its new cancer drug, Avastin doubled the risk of heart attack or stroke when the patient was undergoing chemotherapy.

Analysts at Barclays Private Clients said: “It is not new information and is already highlighted in the product’s prescribing information.

“We would highlight that the patient group Avastin is treating is very sick and a small increased risk of a heart attack - 5 per cent instead of 2.5 per cent - is worth taking if it slows the effects of the cancer”.

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