Cars and chipmakers propelled European shares to fresh eight-and-a-half month highs yesterday as upside momentum was re-ignited by prospects for economic recovery and rekindled demand for personal computers.
Economy-sensitive basic producer and consumer goods companies - from trendy watches and luxury bags to holiday firms and airlines - also put on hefty gains as investors bet rising sales are on the horizon.
Insurers rose as the stock market's ongoing recovery from six-year lows swelled the industry's share portfolios after a bear-market bruising earlier this year.
By 1530 GMT, with only Frankfurt still officially trading, the FTSE Eurotop 300 index of pan-European blue chips was up 0.8 per cent at 906.7 points, and heading for its best close since December 4.
Advancing issues eclipsed decliners by more than two to one in moderate volume as investors bucked the tradition of moribund trading during the dog days of summer.
"I expect it to continue for a while as the momentum is there. It's quite strong. For some sectors people don't care about valuations," said Edwin Slaghekke of Theodoor Gilissen Bankiers, an asset manager in Amsterdam.
The DJ Euro Stoxx 50 index of euro zone blue chips was up 0.5 per cent at 2,576 points.
"With an economic recovery on the horizon in the United States, people are looking for cyclical stocks, whether chemicals, autos or chips, it does not matter," Slaghekke said.
"I would not chase technology at this level. It has a lot of momentum, but when you look at valuations - Intel for instance at 29 times earnings - it's richly priced," Slaghekke said. "It also remains to be seen if this is a full economic recovery."
The Eurotop 300 index hit a six-year low in mid-March and since then has risen by third and has broken decisively above a trading range begun in mid-June when a scorching three-month rally lost momentum.
Car makers are benefiting from the prospect of economic recovery lifting sales, and from the euro dropping to multi-month lows against the dollar, making car exports from the euro zone to the United States more competitive.
The DJ auto index hit its best level since early December as European leader DaimlerChrysler rose 2.4 per cent to 34.52 euros after the company said its second-quarter results were boosted by foreign exchange trading.
Elsewhere in the sector, dealers said UBS investment bank raised its ratings on Peugeot-Citroen and Volkswagen. Peugeot shares rose six per cent to 41.69 euros, while Volkswagen gained 3.3 per cent to 44.44 euros.
Chip stocks surged after broker upgrades and the latest data showed the sector is at last recovering from its worst-ever slump.
Craig Barrett, chief executive of Intel, the world's largest chip maker, saw a possible turnaround in personal computer sales.
The Philadelphia Stock Exchange's closely-watch chip sector index rose to its highest level in over a year.
Among European chip-related shares, Dutch Philips Electronics rose 2.7 per cent to 20.53 euros, Germany's Infineon gained six per cent to 12.40 euros, while Dutch chip equipment maker ASML was up five per cent at 13.23 euros.
Shares in Swatch Group the world's biggest watchmaker, rose 6.3 per cent to 26.85 Swiss francs after the group reported a big bounce in demand in recent weeks after a weak first half as the Sars virus crimped Asian demand.
"In July this trend has been totally changed, Swatch chief executive Nick Hayek said. "People are back in the stores."
Elsewhere in the consumer goods sector, LVMH, a maker of upmarket bags, rose four per cent to 53.05 euros.
Europe's biggest travel firm, TUI of Germany, gained five per cent to 14.26 euros after giving a steady medium-term profit outlook.
On Wall Street, the Dow Jones industrial average was up 0.11 per cent at 9,406 points, while the tech-studded Nasdaq Composite rose 0.3 per cent to 1,765 points.