Perky tech stocks pushed European blue chips higher yesterday as earnings news from the technology sector pleased investors, though insurance shares were weak.
Fund managers said gains in semiconductor and chip equipment makers after better-than-expected earnings from Texas Instruments and Germany's Infineon were driving techs higher.
"People are playing semiconductors coming back and that is one of the main reason for the markets going higher," said Markus Barth, fund manager at Nordinvest in Hamburg.
By 1605 GMT, with only Frankfurt's DAX index still officially trading, the FTSE Eurotop 300 index was 0.5 per cent firmer at 855 points, while the DJ Euro Stoxx 50 index was up 0.71 per cent at 2,437 points, an intraday high.
The DJ Stoxx technology sector rose 1.2 per cent, with French-US software group Business Objects and Dutch chip equipment maker ASML leading the pack, both gaining over six per cent.
Dutch Philips' rose 2.91 per cent, mobile phone giant Nokia stood 2.5 per cent higher, and Europe's biggest chipmaker, STMicroelectronics, gained 1.84 per cent. Volume on the benchmark FTSE Eurotop was 262 billion euros, with risers and fallers roughly even.
Britain's FTSE 100 index was 0.88 per cent higher, while Germany's DAX rose 0.97 per cent and France's CAC 40 gained 0.38 per cent.
Traders said market volatility climbed to levels not seen in three weeks. Germany's so-called "fear barometer", the DAX Volatility index, rose to 28.3, its highest since July 1.
Market watchers said stock markets needed to consolidate at current levels before a fresh push higher.
"All the signs are still good, although I don't expect markets to rally over late July/August. The best way to get another leg-up come September is to have some consolidation at these higher levels now," said the head of European sales trading at a European bank.
Germany's Infineon and Britain's ARM Holdings failed to sustain early gains after above-forecast results.
"Generally, companies have achieved their second-quarter targets, but further share price outperformance depends on a pick-up in capital expenditure and beating raised expectations for the third financial quarter," said Robert Sellar, European technology fund manager at Aberdeen Asset Management.
The FTSE Eurotop 300 index has bounced about 24 per cent after plumbing six-year lows in mid-March. As the reporting season unfolds, markets are fluctuating according to corporate profit updates, keeping the Eurotop within a narrow range between 833 and 877 points.
German chipmaker Infineon said it broke even at its key memory chip unit in the third quarter, beating most analysts' expectations, and said profits were within view as the market was improving.
But shares in Europe's number two chipmaker fell as much as 5.9 per cent on speculation that key shareholder and former parent Siemens could sell Infineon stock, which has risen 59 per cent so far this year, more than most of its peers. Market sources said Siemens was not placing the stock.
"There still might be a placement from Siemens or from the Siemens pension fund. After the recent run-up, the likelihood of a placement has definitely increased," said a Munich-based fund manager.