Europe shares stage late rally on US tech gains

European shares rallied in late trading to close higher on Monday, reversing earlier losses, after US equity markets posted gains led by technology stocks.

"America is providing support," said one trader in Frankfurt, commenting on the turnaround late in the European afternoon.

US stocks gained as an upgrade of Intel Corp. and a partnership between Internet companies eBay Inc. and Google Inc. boosted the tech sector, with the Nasdaq index up 0.7 per cent at the end of the European trading day.

In Europe, German computer software maker SAP climbed 1.5 per cent and Dutch chipmaker ASML put on 0.9 per cent, pushing the European technology index 1.2 per cent higher for the day's top sectoral performance.

The FTSEurofirst 300 index of top European shares closed unofficially with a gain of 0.4 per cent at 1,364.89 points, but volumes were thin with the London market closed for a public holiday. Oil stocks dipped as crude prices fell on news that Hurricane Ernesto, the first of the season in the Gulf of Mexico, had been downgraded to a tropical storm and that it was threatening the Florida Keys rather than US oil facilities on the Gulf coast. Royal Dutch Shell fell 0.5 per cent.

Bank shares remained in focus following weekend news that the boards of Italy's Banca Intesa and Sanpaolo IMI had approved plans to merge, creating the top player in Italy's retail banking market.

Banca Intesa fell 1.6 per cent and Sanpaolo IMI dropped 1.4 per cent - both having gained over 12 per cent last week as talk of their tie-up emerged - but analysts were upbeat on prospects for the new group, which will have a market worth close to $71 billion, making it one of Europe's top 10 banks.

"We regard the SPI/Intesa deal positive, both strategically and financially," Sal Oppenheim said in a note.

"Seeing further upside, we are sticking to our 'Buy' recommendations for both stocks," WestLB said.