Europe's leading shares rose to their highest level in more than two months in late trade yesterday, buoyed by technology stocks and encouraging US data as Wall Street homed in on a seventh straight week of gains.
ING led financials higher as traders drew a sigh of relief, after the Dutch bancassurer posted in-line results.
Battered French media giant Vivendi Universal was the region's best-performing blue chip, its shares jumping by over a fifth on reports of a $15-billion bid for its entertainment assets, even after sources close to the firm said the approach had been rejected.
By 1736 GMT, with only Frankfurt still trading officially, the FTSE Eurotop 300 index was up 3.05 per cent at 936 points - its highest intraday level since September 12.
"The move above recent highs shows this technical rally has still got legs, but I'm not convinced that it will signify a major turning point in the market," said David Thwaites, European equities strategist at BNP Paribas, citing continuing uncertainty over next year's profits and economic outlook.
The looming potential for a second Gulf war is an additional background concern, strategists said, although investors largely ignored news that US warplanes had again bombed Iraqi radar.
Gains were broad-based, with rising stocks outpacing fallers by around seven-to-one. Trading volumes were good.
The Eurotop 300 has rallied by more than 19 per cent since hitting a five-and-a-half year intraday low on October 10.
The narrower DJ Euro Stoxx 50 index of euro zone blue chips leapt 3.64 per cent to 2,636 points.
On Wall Street, the Dow Jones Industrial Average gained 1.88 per cent while the tech-heavy Nasdaq Composite surged 2.61 per cent.
Techs led the way as the Nasdaq rose to its highest point since July, boosted by strong overnight earnings from Hewlett Packard and a surge in the closely-watched Philadelphia semiconductor index to three-month highs.
The Nasdaq's gains helped chipmakers like Germany's Infineon, which surged by 10.6 per cent, and Dutch electronics giant Philips, Europe's third biggest chip maker, which saw its shares rise 7.6 per cent.
Dutch chip manufacturing machinery maker ASML jumped by 15.8 per cent.
Tech investor sentiment will be tested after the US close, with the publication of book-to-bill data for semiconductor capital equipment. The data shows the ratio of incoming orders to shipments and some analysts expect the number to be less than one which would signal that orders are smaller than shipments.
"The book-to-build number is expected to be bad as companies have been cutting their capital spending," one analyst said.
Shares in ING rose 9.84 per cent, after the Dutch bancassurer pleased investors with a rise in quarterly profit despite tough markets and announced plans to boost its solvency in coming years even as its credit rating was cut.
Dog of the day was Brambles, which shed a third of its value after the Anglo-Australian business services firm issued a profit warning - which it blamed on its European pallet rentals business.
There was good news after most markets closed, as a closely-watched but volatile gauge of US manufacturing posted a dramatic improvement. The Philadelphia index of business conditions swung to a +6.1 in November from -13.1 in October.
"Its too early to say that the US economy has got out of its 'soft patch', but it's not getting any worse," said John Calverley, chief economist at American Express Bank.
Federal Reserve Chairman Alan Greenspan said the US economy had hit a 'soft patch' in a recent speech explaining a half percentage point cut in US interest rates.
Data earlier showed US weekly jobless claims totalled 376,000, lower than expectations of a rise to 392,000, suggesting US labour market conditions were improving.
"The weekly jobless numbers are volatile but it is an early indication that US data is starting to gravitate towards a more positive plane," said David Brown, an economist at Bear Stearns.