Earnings optimism helped European shares end the week on a bright note, and car giant DaimlerChrysler lent further support by its decision to stop pouring cash into troubled partner Mitsubishi Motors.
Stellar profits from Swedish truckmaker Volvo and forecast-beating earnings at telecoms equipment maker Ericsson added to perceptions that corporate results justified the leap of faith made by share prices in recent months.
Even so, Ericsson shed four per cent as analysts lamented the lack of second-quarter outlook and advised clients to take some profits from the stock's 85 per cent leap since the start of the year.
Investors, who had feared Europe's lagging economic recovery could cap earnings and sales growth this side of the Atlantic, have welcomed this week's clutch of solid numbers from German chipmaker Infineon, Swiss drug maker Novartis and food giant Nestle.
"Some companies reporting this week, such as Schneider and PPR have highlighted relatively positive growth trends in Europe," said Credit Suisse First Boston strategist Bill McQuaker. "Year to date there have been more than twice as many positive surprises as negative ones from corporate Europe," he added.
Investors will see a rush of earnings announcements next week, including figures from German engineering conglomerate Siemens, oil majors BP and Royal Dutch/Shell and drug makers GlaxoSmithKline and AstraZeneca.
The FTSE Eurotop 300 index of pan-European blue chips ended yesterday 0.45 per cent higher at 1,022.9 points, showing a rise of nearly one per cent on the week, but failing to top a 20-month intraday peak of 1,028 points touched last month.
Markets remained wary of prospects of a summer increase in US interest rates after a surprisingly sharp 3.4 per cent rise in March US durable goods orders added to a picture of sustained recovery in the economy and business investment.
"Equity markets have to decide about the trade-off. Is it good news via the profit impact or is it bad news because of the turn in the interest rate cycle?" asked Matthew Wickens, global economist at ABN AMRO.
Federal Reserve Chairman Alan Greenspan warned investors on Wednesday that higher interest rates loomed, but hinted the change would not be as soon as the market feared, as inflationary pressures were not yet building.
The narrower DJ Euro Stoxx 50 index rose 0.6 per cent to 2,894.2 points as the DAX added 1.1 per cent, and the CAC 40 was 0.7 per cent firmer. The FTSE 100 ended flat, but the Swiss blue chip index gained 0.5 per cent.
Shares in DaimlerChrysler rallied 5.7 per cent after it scrapped plans for a bailout of Mitsubishi after failing to reach a deal with other partners and said it may sell its 37 per cent holding in the loss-making firm.
Europe's auto sector hit its highest level since September 2002. France's Renault gained 2.5 per cent after Deutsche Bank raised its price target.
Volvo, the world's second-biggest truckmaker, jumped four per cent after its first-quarter profits almost quadrupled, comfortably beating expectations.
Other bright spots included Adecco, up 5.6 per cent after the Swiss jobs firm named a new finance chief in a drive to restore investors' confidence after accounting woes shattered its credibility, even though it said nothing about when its twice-delayed results would be published.
Tech stocks were a pocket of strength, with UK software firm Sage Group up four per cent after the world's largest software maker Microsoft reported a strong revenue increase. France's Dassault Systemes rose 1.8 per cent.
Dutch photocopier and printer maker OCE rallied 6.5 per cent after industry giant Xerox said it would deliver a 2004 profit near the higher end of its forecasts.