Oil shares led European stock exchanges to new multi-month highs yesterday, buoyed by a higher dollar, as pleasing US data lured more investors into equities on hopes the world's biggest economy was improving.
More non-core asset sales at Dutch retail group Ahold and new gains from airline companies such as KLM in Amsterdam helped the region's benchmark Eurotop 300 break two points above a eight-week trading range of 780-840.
By 1600 GMT, and with only Frankfurt still officially trading, the FTSE Eurotop 300 index was up 0.97 per cent at 842 - testing 18-week highs again - while the DJ Euro Stoxx 50 index rose 1.13 per cent to 2,393.
Around Europe, London's FTSE 100 ended 0.3 per cent higher at 4,126 points, the CAC-40 added 0.8 per cent at 3,064 points in Paris and the Swiss Market Index perked up 0.8 per cent at 4,749 points.
Frankfurt's DAX had risen 1.4 per cent at 3,069 points by 1555 GMT. All European markets were given a shot in the arm by Wall Street, where the Dow Jones industrial average and the tech-rich Nasdaq Composite gained roughly 0.8 per cent each.
Markets got their second wind from the publication of US Institute for Supply Management data as the index of non-manufacturing activity rose to a forecast-beating 54.5 in May from 50.7 in April.
The news marked the second straight month of expansion thanks to an upturn in US consumer confidence, retail sales and a drop in energy prices.
"These figures are reassuring in so far as they show that we are well past the confidence crisis linked to the Iraqi conflict," said CIC economist Valerie Plagnol.
"But for all that, I think people should drop all their rebound terminology. We are in for a few quarters of irregular economic performance that will be characterised by neither recession nor strong growth."
Some were even more bearish, warning that European investors had too easily shrugged off economic fundamentals this side of the Atlantic to blindly follow Wall Street's trends.
Sharp market corrections are bound to take place when Eurozone companies unveil second-quarter earnings hobbled by unfavourable exchange rates, they warned.
But yesterday, European companies got a breather as the euro hovered two cents below record highs against the dollar as dealers bet on an aggressive interest rate cut from the European Central Bank today.
Oil titans Royal Dutch and TotalFinaElf were boosted two per cent by the stronger dollar, the currency in which they make most of their revenues.
Another climber was Ahold, up six per cent after it sold its confectionery store chain Jamin as part of its battle to reduce debt.
Airlines got a boost as KLM said passenger traffic on route to the Middle East was recovering after the end of the war in Iraq, while cheap ticket offers helped British Airways report a 2.1-per cent increase in May passenger traffic.
The news came after Germany's Lufthansa said at the weekend that it saw signs of a recovery in air traffic.
Shares in Finland's national carrier Finnair rose as investors also bet the worst effects of the deadly SARS virus in Asia had now passed.
Elsewhere, UK telecom operator Cable & Wireless added seven per cent after a presentation from the firm's management fuelled belief it would deliver on restructuring plans, while analysts were positive on its decision to bail out of the United States.
On the downside, German carmaker DaimlerChrysler shed 2.2 per cent after cutting its full-year profit forecast, blaming a fiercely competitive US market for a one-billion-euro second-quarter operating loss at its Chrysler unit.
The top-ranked auto team at Morgan Stanley cut its earnings estimates for the group and said: "Further incentive increases must be applied to over 500,000 units of dealer stock. Such pressures may be more ongoing than one-off."