Strong Philips and economic hopes lift eurostocks

European blue chips rose yesterday, lifted by electronics giant Philips' five per cent surge as investors saw increased prospects of a global economic upturn.

European markets retreated from earlier highs as Wall Street turned negative despite US data which supported arguments that the economy was recovering.

The Federal Reserve said in a report that output at US factories, utilities and mines rose 0.1 per cent in August while the Commerce Department said inventories at US businesses dipped in July - suggesting that companies might need to lift production to keep up with demand.

By 1351 GMT, the FTSE Eurotop 300 index was up 0.36 per cent at 904 points, while the DJ Euro Stoxx 50 index gained 0.29 per cent to 2,554 points.

Volume on the benchmark FTSE Eurotop 300 index was €1.6 billion and advancers outnumbered decliners by about three to one.

Around Europe, London was 0.55 per cent higher, Zurich gained 0.47 per cent, Paris rose 0.64 per cent and Frankfurt was 0.27 per cent higher.

Traders said volumes remained light with some volatile trade expected this week before Friday's triple-witching derivatives expiries across Europe.

"Everybody is expecting a volatile rest of the week and it hard to predict where the market is going," said Udo Becker, trader at Merck Finck & Co. in Munich.

Philips stock rose as much as 5.19 per cent after the group raised its targets for chip sales on Friday. Investment banks Morgan Stanley and JP Morgan both raised their targets for earnings per share yesterday.

Shares in Swiss engineering firm ABB rose 5.5 per cent on expectations that the key sale of its oil, gas and petrochemicals unit will be announced this week.

In Germany, shares in steel and engineering group ThyssenKrupp rose 3.22 per cent after weekend media reports that ThyssenKrupp wanted to increase its steel production capacity in China tenfold to around 700,000 tons by the end of 2004.

Market reaction was muted to Sweden's rejection of the European Union's single currency, with the "no" campaign carrying the vote by a resounding 56-42 per cent margin.

Analysts said a "no" was expected, while companies said it may affect long-term investment decisions but would not make an impact in the short term.

Swedish bank shares gained as they will not have to shoulder conversion costs to the euro after the vote, but information technology stocks fell on lost chances for contracts linked to dropping the crown.