European shares closed higher yesterday, helped by a rebound in beaten-down technology stocks, but concerns about US interest rates kept gains in check ahead of today's meeting of the Federal Reserve.
Auto makers were firmer as DaimlerChrysler rallied 1.4 per cent on reports it will sell its 10.5 per cent stake in Korea's Hyundai Motor Co., worth nearly $1 billion.
With London markets closed for the May bank holiday, activity was light, but indexes closed near their highs after a solid morning session on Wall Street.
The FTSE Eurotop 300 index of pan-European blue chips closed 0.6 per cent firmer at 999.2 points on turnover of about one billion euros - less than half normal turnover.
The narrower DJ Euro Stoxx 50 index ended 0.7 per cent higher at 2,806.7 points.
Stocks were under pressure last week as investors worried about the impact of likely rises in US interest rates on global growth and stock valuations.
However, strong corporate profit growth, supported by an improving macroeconomic data meant the picture was mostly positive for stocks, some analysts said.
"We think it's probably premature to be too cautious and to go strongly into defensives or to be too negative on equity markets," said Bernd Meyer, European strategist at Deutsche Bank.
"We believe that growth is not slowing substantially, and if earnings continue to come through, markets become cheaper and cheaper - particularly the cyclicals."
Mr Meyer said insurers would benefit from rising bond yields, while other cyclical sectors such as construction, media and industrial goods and services also remained attractive.
Markets are focused on today's Fed meeting, which is expected to prepare markets for a rise in rates as early as summer.
Data yesterday showing US factories continued to expand in April did little to dissuade investors that a rate rise was on the cards.
The Institute for Supply Management's main activity index edged down to 62.4 in April, but both the pricing and employment components came in stronger than expected.
"The ISM number definitely makes it more likely that the Fed hikes sooner rather than later... New orders were solid, employment was solid and prices were through the roof again," said Greg Anderson, a senior foreign exchange strategist at ABN AMRO in Chicago.
In New York, the blue-chip Dow Jones industrial average was up 0.8 per cent at 10,305.6 points and the Nasdaq Composite Index up 1.6 per cent at 1,951.3 points by 1609 GMT.
Around Europe, Paris's CAC-40 ended up 0.9 per cent, Zurich's SMI rose 0.7 per cent and Frankfurt's DAX closed 0.6 per cent higher.
Data showing that global sales of semiconductors continued to accelerate in March helped lift chip stocks. Global sales rose by a third year-on-year, according to data cited by the European Semiconductor Industry Association.
Infineon rose 2.4 per cent and Philips added 1.8 per cent, while other tech stocks also found some support after a hefty sell-off over the past month.
Germany's biggest broadcaster ProSieben closed 4.3 per cent firmer after its first-quarter core earnings jumped and the company said it expected a clear improvement in full-year earnings.
Engineering firm Alstom rose 3.2 per cent after France's finance minister and the European Commission's competition chief promised "rapid progress" to solve its problems, while Swiss banking giant UBS edged 1.7 per cent higher ahead of its first-quarter results today.
Switzerland's Adecco rallied 4.4 per cent after creditors agreed to give the global employment services firm seven weeks to publish its long-delayed 2003 results.
German drugs and chemicals firm Bayer shed 2.3 per cent after the stock went ex-dividend, meaning that buyers would no longer qualify for the latest pay-out.
Also weaker was Dutch satellite firm New Skies Satellites, down 3.8 per cent after the company poured cold water on expectations of an imminent takeover or merger.