Metals groups led European shares to within striking distance of 30-month highs yesterday as bellwether copper prices rallied on good Chinese demand.
Technology also was strong as Swedish telecoms equipment maker Ericsson rose 2.8 per cent after it won a big contract to supply Germany's T-Mobile with replacement GSM mobile network equipment.
Philips Electronics was up two per cent on hopes of a robust performance from its LCD screens unit after a rival said LCD prices could recover as soon as the second quarter. Goldman Sachs investment bank also said it was looking for a turnaround in Europe's tech sector after its underperformance.
The FTSEurofirst 300 index closed up 0.4 per cent at 1,052.04 points, leaving it back near this month's 2-1/2 year high of 1,058.29 points, though analysts cautioned about reading much into the day's gains.
"It's all a bit thin today with the US market closed, and any news coming out today has tended to be positive. It's also a follow-on from Friday's gains on Wall Street," a member of Deutsche Bank's equity focus team said.
The DJ Euro Stoxx 50 index ended up 0.5 per cent at 2,963.06 points.
Fund managers said Europe was supported by fundamentals. "Valuations relative to bonds, relative to history and in comparison with other regions of the world suggest that European equities are still quite attractive," said Alan Zlatar, head of European equities asset management at Julius Baer.
The mining sector was spurred higher by news that copper shortages lifted January futures to the daily limit on the Shanghai Exchange, triggering a one per cent rally in the red metal on the London Metal Exchange as well.
Chilean copper miner Antofagasta rose 4.4 per cent, while Swiss-based metals group Xstrata gained five per cent, BHP Billiton 2.6 per cent and Rio Tinto 2.6 per cent.
Standard & Poor's credit rating agency said positive rating actions in the European mining sector had recently accelerated due to much improved market conditions in each metal segment, with steel also strong.
"European steelmakers continue to benefit from high steel prices and are expected to record very strong earnings and cash-flow for the final quarter of 2004 and the first quarter of 2005," said Standard & Poor's credit analyst Tommy Trask.
Steel sector leader Arcelor was up 1.3 per cent, while Spanish steelmaker Acerinox rose by two per cent and Swedish peer SSAB by 1.2 per cent.
Shares in Deutsche Boerse rose 4.1 per cent as opposition from some shareholders to its £1.3 billion offer to buy the London Stock Exchange raised the prospect that a deal would fall through, traders said.