European blue chips mostly rose in late trade yesterday, led higher by Kingfisher after solid sales data from the UK retailer and by Sanofi-Synthelabo, after the French drugmaker pleased with its results.

But Zurich underperformed the rest of the region after grim earnings news from leading Swiss bank UBS, while top news and data provider Reuters was hammered after reporting a record loss and a fresh round of job cuts.

Strategists said the issue of a possible US-led war with Iraq continued to cloud the broader outlook for shares and helped keep a lid on trading volumes, with the White House saying it could propose a new UN resolution for disarming Baghdad as soon as this week.

"We're still in the land of drift," said David Thwaites, pan-European equities strategist at BNP Paribas. "And we've got another one to four weeks or so of it until we find out exactly what's going on with Iraq."

Meanwhile, data showing European industrial production fell by a record 1.5 per cent in December compared to the previous month reminded investors that behind the war clouds lie some worrying economic fundamentals.

By 1645 GMT, with only Frankfurt still trading officially, the FTSE Eurotop 300 index of pan-European blue chips was up 0.9 per cent at 804 points, while the narrower DJ Euro Stoxx 50 index rose 1.6 per cent to 2,276 points.

That left the Eurotop benchmark on course for its highest close in almost two weeks after three straight days of gains, with rising stocks outnumbering fallers by about three to one.

Bucking the positive regional trend was the Swiss Market Index, which fell 1.23 per cent.

Strategists said there was scope for shares to climb further in coming weeks, after the Eurotop benchmark closed at six-year lows last week, providing there was a break in the current impasse over Iraq, which has France leading the opposition to Washington and London.

"The markets want to see a first credible step towards a solution - any solution, whether it's war or peace," Thwaites said.

Shares in Kingfisher leapt 8.2 per cent after Europe's leading home improvements retailer delivered better fourth-quarter sales than expected and said profits this year would be slightly ahead of current forecasts.

Sanofi-Synthelabo spiked 9.5 per cent higher, after France's No.2 drugmaker reported a 27.8 per cent surge in 2002 profits and promised continued high double-digit earnings growth this year.

Technology stocks collectively also shone in line with a firmer Nasdaq, which surged 1.8 per cent, broadly erasing its losses so far this year.

Also on Wall Street, which opened up for business in a feisty mood after enjoying a long weekend holiday, the Dow Jones industrial average rose 1.7 per cent, helped by reassuring corporate outlooks from the likes of Lucent Technologies.

However, UBS fell 5.1 per cent, dragging the rest of the Zurich market down with it, after Switzerland's largest bank posted a worse-than-expected quarterly loss and said it expected a tough 2003 as the possibility of a war in Iraq made economic recovery "simply unpredictable".

News and information provider Reuters was Europe's biggest decliner, tumbling 11.7 per cent amid concerns about the firm's outlook after it reported a record loss and said it planned to cut 3,000 jobs over three years.