Europe stocks end higher on ECB comments

European stocks closed slightly higher yesterday after the European Central Bank (ECB) played down the chances of a May interest rate rise, with technology stocks rising and carmakers falling.

Major European markets advanced after ECB President Jean-Claude Trichet crushed market expectations for a rate hike next month. But the lift was slight as the central bank left the door open for a rate increase in June.

A weak Wall Street weighed on European shares in the afternoon, with the Dow Jones industrial average falling 0.5 per cent to 11,185.36 by 1815 GMT, hit by a decline in Merck & Co .

The pan-European FTSEurofirst index of 300 leading shares ended up 0.2 per cent at 1,381.80 points.

Across Europe, Germany's DAX, France's CAC 40 and Britain's FTSE 100 were all almost 0.1 per cent up.

"Markets could only benefit shortly from Trichet's comments because a rate rise in May had been firmly priced in," said Guenther Senftleben, a strategist at Bankgesellschaft Berlin.

He added that interest rate worries would not ease as a hike in June or July was now a realistic option.

Mr Trichet, speaking after the central bank held its key rate unchanged at 2.50 per cent, said a handful of strong economic reports was no reason for the Governing Council to rush into action.

Among big sector gainers was technology, lifted by software giant SAP's rating rise from ABN AMRO. A rally in Apple Computer propelled Nasdaq to a five-year high and Asian memory chip makers such as Toshiba rose.

SAP climbed 3.6 per cent after ABN raised it to "buy" from "hold" and lifted the price target to €280 from €160.

"We expect SAP's market share to grow from 10 per cent to 24 per cent by 2010 in a much bigger, more fragmented market," ABN AMRO analysts said in a research note.

Dutch chipmaker ASML gained four per cent and accessory maker Logitech climbed 2.2 per cent.

"If you look at the technology food chain in Europe there's not much exposure to Apple here," says Theo Maas, a technology fund manager at ABN AMRO Asset Management.

"Memory chip companies have had a very strong run. Sometimes these things come at the same time and help overall sentiment."

Europe's major carmakers fell despite stronger German March registration and export data after Credit Suisse downgraded autos and components to "market-weight" from "over-weight."