Philips Electronics and DaimlerChrysler led European shares sharply higher yesterday afternoon as fresh signs of an improving US jobs market banished worry over the ailing dollar to the back burner.
However, Europe's largest software firm SAP sank 2.3 per cent to 126.3 euros, giving back some of Wednesday's hefty gains as brokers said the stock now looked expensive.
Investors took heart that the number of Americans filing initial claims for jobless aid fell last week to its lowest level in eight months, raising hopes the US economic recovery was creating new jobs to keep the economy's lynchpin - consumer spending - in fine fettle.
"The watchword is that the labour market seems to be steadying, but there is not much indication things are moving to life to any significant extent. Perhaps the worst is over," said Steve Barrow, a strategist at Bear Stearns bank in London.
"We are moving from weakness to stability rather than to strength, is the best way you can describe things at the moment," he added.
By 1349 GMT, the FTSE Eurotop 300 index was up 1.36 per cent at 900 points, only some 31 points short of the 8-1/2 month high hit in early September as investors bet on US economic recovery.
Adding buoyancy to sentiment, US retailers such as giant Wal-Mart posted better-than-expected sales in September as Americans continued to shop, fuelling economic recovery.
Another boost came from the results of the likes of Internet group Yahoo and biotech giant Genentech as the US earnings season gets underway.
With recovery slow in Europe, investors are looking to the US economy to pull ahead so that European companies can export more.
The DJ Euro Stoxx 50 index rose 1.8 per cent to 2,518 points. In Frankfurt, the DAX was up two per cent, helped by news that employment in Europe's largest economy was improving unexpectedly too.
On Wall Street, the Dow Jones industrial average rose 0.9 per cent to 9,719 points. The tech-laden Nasdaq Composite advanced 1.4 per cent to 1,920 points as high profile component Yahoo jumped 7.6 per cent.
Shares in Germany's HVB Group rallied 7.2 per cent to 15 euros as the former Hypovereinsbank sold Swiss private Bank von Ernst for $381 million to prop up its finances.
Other standouts included Italian eyewear maker Luxottica, which rose five per cent to 13.4 euros after Smith Barney raised its rating on the stock to "buy" from "hold", saying it believed the group was behind a $321 million offer for a chain of US eyeglass stores, Cole National.
UK healthcare firm Amersham advanced 3.2 per cent to 661-1/2 pence, up for a second session in a row. A source close to the situation told Reuters that General Electric had made a bid approach.
Meanwhile, Philips Electronics also rose for a second day after Taiwan's TSMC, the leading contract semiconductor maker in which Philips has a large minority stake, posted strong revenues, which gave a clear sign that consumers are lifting the sector out of a long slump.
The downward pressure on the dollar versus the euro appeared to be easing, helping euro zone exporters such as carmaker DaimlerChrysler to push 3.8 per cent higher to €30.6.
US Treasury Secretary John Snow said the United States had not changed its long-standing strong dollar policy despite the greenback's slide in recent days.
Investors feared that if the dollar kept sliding against the single currency, the value of euro zone exports to the United States would shrink and thus dent earnings.