European shares edge higher on encouraging earnings


* FTSEurofirst 300 index gains 0.3 percent

* Autos, financial gain on encouraging earnings

* Royal Dutch Shell drops after results

By Atul Prakash

LONDON, Oct 31 (Reuters) - European shares edged higher totrade near a five-year high by midday trading on Thursday, withautomobile and financial sectors advancing after someencouraging company results.

The European automobile index climbed 1.5 percent,the top sectoral gainer, led by a 5.8 percent jump in Finnishtyre maker Nokian Renkaat after it reportedbetter-than predicted operating profit.

The market also got support from a 1.2 percent gain in thebanking sector, with Spain's Banco Popular rising 6.9percent after posting better than expected nine-month earningsthanks to trading and capital gains.

Earnings results were mixed on Thursday, with oil majorRoyal Dutch Shell's third quarter profits undershootinganalysts' forecasts and pushing its shares 4.5 percent lower.

"The earnings that are coming through are weak but stable. The broader environment is much more supportive of equityprices," said Oliver Wallin, investment director at OctopusInvestments.

"The amount of liquidity in the markets and the capacity inEurope and Japan to inject further is generally positive for themarket."

At 1226 GMT, the pan-European FTSEurofirst 300 index was up 0.3 percent at 1,291.43 points after climbing toa five-year high in the previous session. However, the indexremained on track to record a second straight month of gains.

However, the oil services firm Technip fell 9percent, the top decliner on the FTSEeurofirst, after cuttingits full-year sales and margin targets for its sub-sea business.

Investors brushed aside concerns that the Federal Reserve'sless-dovish-than-expected statement on Wednesday could mean thatthe U.S. central bank might start trimming its stimulus soonerthan foreseen.

The Fed kept its massive stimulus plan intact as the marketwidely expected, but did not sound as alarmed about the state ofthe economy as anticipated, removing a reference to tighterfinancial conditions from its announcement.

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