European stock indices veered towards five-month closing highs late yesterday, spurred higher in brisk trade by a mixture of interest rate cut hopes, overnight gains on Wall Street, and favourable currency trends.
Export-sensitive auto stocks such as Peugeot, Fiat, and DaimlerChrysler led the climbers as hopes grew that the recent surge in the euro to record highs may have run its course.
Investors also snapped up volatile insurance stocks such as Dutch groups Aegon and ING, lured by the growing value of insurers' huge equity holdings.
By 1619 GMT, the FTSE Eurotop 300 index of pan-European blue chips had halved its earlier gains and was 0.6 per cent higher at 866 points, as a flat performance by US shares helped temper some of the impetus from Wednesday's surge in US stock indexes to their highest levels in 2003.
But that still left it on course to close at its highest level since January 16.
The euro zone DJ Euro Stoxx 50 index rose 1.2 per cent to 2,481 points. Trading volumes were heavy.
Earlier US retail sales data and US jobless figures were in line with expectations and were not seen discouraging the Federal Reserve from cutting US interest rates later this month, economists said.
Some strategists the market was now passing through a cyclical bull phase.
"We're moving to a US-led earnings-driven bull market which is stock-specific and focused on profitability," said Mark Tinker, head of strategy at broker Execution Ltd.
He said recent share gains were linked to expectations of a pickup in the US economy which companies were set to exploit thanks to productivity gains and operational leverage, but did not mean investors saw the beginnings of a new boom.
With the dollar trading sideways against the euro for the past three weeks and the euro hitting a one-month low versus sterling, euro zone-based car makers were seen in a better position to sell cars abroad.
Peugeot, Daimler, and Fiat gained between two per cent and 4.5 per cent, while French car parts Valeo jumped 6.1 per cent.
"The euro's sharp (recent) rise had led to brutal corrections in the sector and now investors are coming back into the sector," one senior trader said.