European shares ended higher yesterday, buoyed by France Telecom's plan to double its dividend, while a dip in oil prices and an upward revision to US gross domestic product data bolstered sentiment.

Oracle's higher-than-expected quarterly net profit propped up rival software maker SAP, while upgrades by Credit Suisse First Boston on chip makers Infineon and STMicroelectronics also cheered the tech sector.

A 1.5 per cent slide in oil prices, while boosting the overall market, pressured heavily weighted energy stocks such as Royal Dutch, and this put a slight cap on equity gains.

The pan-European FTSEurofirst 300 index of pan-European blue chips gained 0.3 per cent to 1,143.9 points, bringing it a mere 0.7 per cent away from last week's three-year high of 1,151.74. The narrower DJ Euro STOXX 50 index closed 0.5 per cent higher at 3,178.56 points.

Worries that higher energy prices could pinch consumer spending and corporate profits were soothed by data showing that robust new-home building and stronger exports had helped the US economy expand at a faster-than-expected 3.8 per cent annual rate in the first quarter.

But these worries remain, said strategists like Jean-Luc Buchalet from earnings tracking firm JCF Group. Mr Buchalet said oil prices were the "fundamental problem" of equity markets.

"There is for now no concern over the strength of the US and Chinese economies, which continue to drive global growth, but if sustained, such a growth would drive oil prices to around $70-$75 a barrel in 2006," Buchalet said.

"This (oil price level) would necessarily slow down the global economy and stock markets are likely to start anticipating this in the second half of this year."

Around Europe, London's FTSE 100 index added 0.4 per cent, Paris's CAC 40 gained 0.9 per cent, and Frankfurt's DAX ended 0.6 per cent higher. The Swiss Market Index was up 0.9 per cent in Zurich.