Auto shares drove European blue chips higher at midsession yesterday as a strengthening dollar eased exporters' pain, while German chemical company BASF gained on positive broker comments.
"The German automakers are doing particularly well due to the strengthening of the dollar spot rate, which led to hopes that the pressure on exporters' profits may ease," one European autos analyst said.
Strategists said this may be a fleeting respite, however, as there was scope for the dollar to weaken further.
Barclays led the blue-chip losers board, shedding two per cent on a report that Bank of America would bid for Fleet Boston, quashing talk that the US giant would bid for Britain's third-biggest bank.
Separately, Barclays said it would buy wealth management firm Gerrard for £200 million as it looks to boost its presence in fund management.
European markets are about 30 per cent above six-year lows hit in mid-March but have been backing off as they neared their highs for the year recently, blocked by concerns that steady corporate earnings growth had already been priced into the markets.
"It's a finely balanced call, but we believe European equities may have peaked for the year. We worry that risk appetite is satiated," said Michael Hartnett, Director of European Equity Strategy at US investment bank Merrill Lynch.
Hartnett pointed to concerns about UK monetary policy tightening, saying a rise in interest rates may prompt some investors to sell riskier assets.
By 1117 GMT, the FTSE Eurotop 300 index was up 0.7 per cent at 901 points, while the DJ Euro Stoxx 50 index gained 1.0 per cent to 2,506 points.
Volume on the benchmark FTSE Eurotop 300 index was 659 million euros and advancers outnumbered decliners by a ratio of four to one.
Around Europe, Britain's FTSE 100 index was 0.2 per cent higher, Germany's DAX was 1.7 per cent up, France's CAC 40 was 0.9 per cent stronger and the Swiss SMI was 0.9 per cent firmer.
Investors were keen to see if the steady economic upturn has boosted earnings at some of the companies more sensitive to economic cycles.
"The focus today will mainly be on cyclical stocks, Reuters and Scania, for example, as they give the market an idea of how the economy is doing," said Rolf Elgeti, chief Europoean strategist for Commerzbank.
Scania, Europe's third-biggest truck maker, is expected to post a 45 per cent increase in third-quarter pre-tax profit later yesterday.
Shares in Reuters climbed over 3.3 per cent after the news and information provider reported a 10.9 per cent fall in core subscription revenues, a touch better than market estimates, and said its full-year revenue decline could be slightly better than its last forecast of an 11 per cent drop.
"You have a number of media and service companies that have a generally positive outlook. But with some of the manufacturers, pricing continues to be a bit of an issue," Elgeti said.
DaimlerChrysler led auto stocks higher after the dollar strengthened, lifted by hopes that its exports to the United States would become more competitive.
BASF was 2.3 per cent firmer after investment bank Merrill Lynch upgraded the German chemicals company to "buy" from "neutral", saying the firm was its top pick to take advantage of economic recovery into 2004.