European indices were set to close near fresh eight-and-a-half month highs yesterday after US chip giant Intel buoyed the tech sector with a bullish outlook, fuelling hopes of an economic recovery.
Advertising giant WPP Group led media stocks higher after saying it sees signs of improvement in the industry, while Vivendi Universal rallied on hopes of a positive outcome to the auction of its US entertainment unit.
By 1535 GMT, with most markets around Europe closed, the FTSE Eurotop 300 index was up 0.4 per cent at 912 points although volume was light. The narrower DJ Euro Stoxx 50 index was 0.4 per cent firmer at 2,593 points.
The FTSE Eurotop has posted gains for 11 of the last 12 sessions and has climbed around two per cent in the past week as investor confidence about a US-led economic recovery grows.
"Fundamentals have got a bit better but we have really gone off to the races and discounted the economic recovery," said Simon Hallett, a fund manager at Barings Asset Management, which manages e 6.1 billion of European shares.
"We have been seeing a little bit of panic buying, particularly with anything vaguely associated with a recovery," he said, adding that industrials and materials appeared overbought.
Strategists said investors were putting their faith in a US-led recovery improving corporate profitability.
"European survey data is improving but the official GDP data is still very weak, with Germany, Italy, France all in recession. The market is saying that if the US is strong, surely we will be picked up with it," Merrill Lynch European equities strategist Khuram Chaudhry said.
Around Europe, Britain's FTSE 100 index was 0.1 per cent higher, France's CAC 40 was up 0.6 per cent and the Swiss SMI was 0.7 per cent firmer.
Germany's DAX, the only market still officially trading was 0.6 per cent down.
The Dow Jones industrial average was flat, while the Nasdaq Composite was up 0.4 per cent, having earlier hit its highest level since April 2002, buoyed by Intel's upgraded revenue and margin targets for the third quarter.
European chip heavyweights Infineon and Philips Electronics rose as much as six per cent after the Intel statement and last traded up about four per cent each.
Investors were quick to seize on one of the few signs of top-line revenue growth among major corporates, which have been largely relying on aggressive cost-cutting to protect margins.
"That is great news for Intel, chip firms and some of the PC companies but I would be reluctant to carry that across the tech sector or the wider market," Chaudhry said.
Dutch chip equipment makers ASML and ASMI both rose more than five per cent.
In other sectors, Swiss engineering firm ABB rose 4.8 per cent on growing hopes it might win large contracts to upgrade the US power grid after a massive blackout last week.
Vivendi was the top blue-chip gainer, up 5.2 per cent after a bid of more than $12 billion was made for its entertainment business from a team led by Edgar Bronfman Jr.
WPP climbed 1.2 per cent reporting signs of a recovery in the advertising market from one of the worst downturns on record.
Holland's biggest telecoms operator KPN gained 1.2 per cent after its quarterly numbers beat market forecasts and the firm raised a slew of financial targets as cost-cutting bore fruit. Banks were among the few blue-chips to weaken, led by a 2.3 per cent decline from Deutsche Bank and a 1.9 per cent fall for Societe Generale.