European stocks rose in early trade on Thursday to hit a 5-week high as rallying energy and utility stocks offset insurers hit by poor results, while investors braced for key interest rate decisions.
EDF gained 5.5 percent, boosted by planned increases in French electricity tariffs, while French water and waste management group Veolia Environnement surged 9 percent after it raised its 2008 sales growth target.
At 0835 GMT, the FTSEurofirst 300 index of top European shares was up 0.5 percent at 1,198.85 points, rising for the third consecutive session.
Financial markets were also bracing for interest rate decisions by both the European Central Bank and the Bank of England, expected during the session. The ECB, at 1145 GMT, and the BoE, at 1100 GMT, are expected to keep rates steady and investors will watch any rhetoric from the banks to gauge how they are balancing growth and inflation concerns.
"We're going to closely look at Trichet's wording," said Philippe Gijsels, senior equity strategist at Fortis Bank, in Brussels.
"The market is clearly hoping that he will come with a statement indicating that not only is the bank not going to hike interest rates, but also that it sees the possibility of lowering them, not immediately but toward the end of the year or the beginning of 2009."
Belgian-French financial services group Dexia SA sank 6.6 percent after unveiling an overhaul of its U.S. bond insurance unit FSA following its second-quarter losses that pushed Dexia's net profit sharply lower.
Allianz, Europe's biggest insurer, fell 1.5 percent after it abandoned its profit targets and said new guidance was impossible given financial market turmoil that kept its Dresdner Bank firmly in the red in the second quarter.
Dutch insurer Aegon NV dropped 4 percent after reporting a 58 percent fall in quarterly profit, hurt by impairments on U.S. credit and subprime mortgage investments.
Among banks, British bank Barclays Plc gained 3 percent after reporting a 33 percent drop in first-half profits as it took a 2 billion pound writedown on the value of risky assets, but the profit drop was not as steep as expected.
Also on the upside, AXA rose 5.5 percent after the French insurer posted a smaller-than-expected drop in first-half profit and said it did not need to raise capital.
Energy shares were on the rise, as oil prices ticked higher after a recent sharp drop. Total gained 1.4 percent and BP rose 1.7 percent.
Around Europe, Germany's DAX index rose 0.5 percent, UK's FTSE 100 index gained 0.6 percent and France's CAC 40 added 1 percent.
Deutsche Telekom gained 1.8 percent after posted slightly lower second-quarter core profit and sales, in line with expectations.
Nestle, the world's largest food company, was down 0.1 percent after the group's first-half results failed to impress investors.
The FTSEurofirst 300 is down 21 percent on the year, hit by inflation worries, fears of a U.S. recession as well as concerns over the banking sector, but the index has gained 9.7 percent since touching a multi-year low in mid-July, helped by better-than-feared corporate results and a sharp retreat in oil.
"What we need to see is a confirmation that the drop in oil prices is not just a correction but a reversal in trend… a confirmation that we're getting closer to the end of the credit crisis…and finally we would like to see a long-term technical buy signal in the market," Gijsels said.
"Until these three conditions are met, for us this will remain nothing more than a bear market rally
