Pleasing updates from Nokia and AstraZeneca lifted European shares to fresh 2-1/2 year highs yesterday, with economic reports in the United States and Germany also helping to bolster sentiment.
Forecast-topping profits at German engineering conglomerate Siemens and Philips Electronics also buoyed investors, but uncertainty ahead of fourth-quarter US gross domestic product data today and oil prices again nearing $50 a barrel slightly capped market gains.
On the corporate activity front, things heated up in the battle for control of the London Stock Exchange as Deutsche Boerse unveiled details of its proposed takeover of the London bourse.
The announcement prompted continental rival Euronext to make a rare statement, saying its discussions with the LSE were continuing and that it would make a submission to the Office of Fair Trading soon over a possible offer.
The FTSEurofirst 300 index of pan-European blue chips ended 0.4 per cent higher at 1,059.5 points, its highest closing level since July 8, 2002, while the narrower DJ Euro STOXX 50 was up 0.5 per cent at 2,970.8 points.
Nokia shares surged six per cent after the Finnish giant posted a lower than expected drop in fourth-quarter earnings and forecast strong sales in the first quarter of this year, helping mend sentiment after a patchy set of earnings in the sector.
Britain's AstraZeneca also rallied four per cent after Europe's third-biggest drug maker reported a 19 per cent rise in 2004 earnings and said established medicines and cost cuts would drive 2005 growth, despite setbacks to newer drugs.
Elsewhere, forecast-topping first-quarter profits lifted Siemens shares by three per cent, while fresh talk that Lloyds TSB could be a takeover target pushed the banking stock 1.2 per cent higher.
And Standard Chartered rose 2.1 per cent following a report that JP Morgan might be interested in buying a stake in the Asia-focused bank.
But United Utilities was the biggest FTSE faller, down 2.1 per cent after Deutsche Bank cut its rating on the water and electricity group to "hold".
Investors welcomed a report by the GfK research group, saying that German consumer sentiment was set to improve strongly next month as shoppers' income expectations surge and their readiness to spend rises to a three-year high.
"The upturn in Germany's GfK consumer confidence index was a genuine surprise, especially since consumers' mood has been so downbeat for the last few years," said economist David Brown at Bear Stearns.
Data showing a forecast-beating 0.6 per cent rise in new orders for long-lasting US-made goods last month, and a smaller-than-expected rise in last week's initial claims for unemployment supported the dollar.
But traders said strong economic data raised the risk of tighter monetary policy barely a week before the Federal Reserve meets on interest rates.
In New York, the Dow Jones industrial average was down 0.23 per cent at 10,474.64, while the technology-laced Nasdaq Composite Index gained 0.27 per cent at 2,051.60.