Better than expected second quarter figures from UBS sent Switzerland's biggest bank soaring and provided a strong lift to stocks across the sector. UBS shares jumped 6.9 per cent to SFr79.45 - their best single session showing since October 1998 - while Swiss peer CS Group put on 4.5 per cent to SFr292.
The FTSE Eurotop 300 banking index performed strongly, gaining 2.1 per cent, with Deutsche Bank, up 2.5 per cent at €76.60, among the star performers.
UBS reported a 26 per cent decline in second quarter net profits, much better than market expectations of a 40 per cent decline.
Germany's MLP, which replaced Dresdner Bank in the benchmark Dax index last month, rose 1.3 per cent to €92.21 as the group reported a sharp rise in pre-tax profit and reiterated its forecast of 30 per cent growth in the second half of the year.
Among the insurers, Allianz gave up early gains after it reported first-half gross premium income up almost 8 per cent and better-than-expected pre-tax profits. The shares were virtually flat at €321.40.
Telecommunications stocks continued to climb back up the cliff they fell off earlier this year and the rally reached such a pitch of momentum yesterday that even Deutsche Telekom found itself caught up in the celebrations. A Goldman Sachs upgrade for Telekom, which hit a 41-month low on Monday after sliding 22 per cent in five straight sessions, was one of the more obvious focal points for the upturn in sentiment. In seasonally low trading volumes, Telekom jumped 4.2 per cent to €19.90.
France Telecom, rumoured to be bidding to increase its 35 per cent in TPSA of Poland, 1.6 per cent to €46. Telefonica gained 2.8 per cent at €13.48 and KPN 2.5 per cent at €4.84.
