Several of Europe's stock markets ended at three-year highs yesterday, crossing levels prior to the bombs in London last week, encouraged by a fall in oil prices and a tech rally buoyed by earnings hopes.

The technology sector was the best performer, with a 2.2 per cent rise. Dutch chip equipment maker ASML, which kicks off the sector's earnings tomorrow, jumped 4.3 per cent, and STMicroelectronics rose three per cent.

The pan-European FTSEurofirst 300 index ended 0.5 per cent higher at 1,157.5 points, just below a three-year high of 1,159.07 struck last week. The DJ Euro STOXX 50 put on 0.68 per cent to 3,246.4 points.

"Reassurances that earnings have not been badly hit by rising raw material costs will be enough to support equities because valuations aren't looking too stretched," said one European equities strategist.

Among standout losers, VNU lost nearly four per cent as some investors highlighted concerns over the price the Dutch media group is paying for its planned purchase of US healthcare data provider IMS.

Equities got support from oil prices, which fell more than $1 to $58.2 a barrel, extending Friday's losses as worries about damage to US oil and gas facilities eased following the passage of Hurricane Dennis.

US markets also rose, with the Dow Jones industrial average up 0.6 per cent and the Nasdaq Composite index rising nearly one per cent on earnings optimism.

Around Europe, London's FTSE 100 index ended 0.2 per cent stronger, Paris's CAC-40 rose 0.5 per cent and in Zurich, the SMI put on 0.7 per cent, all at three-year highs.

German stocks outperformed as investors cheered reforms planned by the opposition Christian Democrats (CDU) ahead of Germany's elections in September, which they are expected to win.

Frankfurt's DAX rallied 1.4 per cent, with the biggest influence in the market coming from names such as Siemens, SAP and utility RWE.