European shares closed the week on a robust note yesterday with investors now looking to the Federal Reserve to cut US interest rates next week in the hope of giving markets a further lift.
Anglo-Dutch Unilever rose 2.6 per cent to 53.10 euros in Amsterdam before a trading update due on Monday.
Oil stocks such as Royal Dutch and BP were bolstered by a surge in crude oil prices as data showed that key producer Saudi Arabia has been cutting output.
The drug sector, led by AstraZeneca, eased after its strong run-up earlier in the week, but Madrid was boosted late in the day, with dealers citing a programme trade.
By 1557 GMT with only Frankfurt officially trading, the FTSE Eurotop 300 index was up 0.8 per cent at 876 points.
The pan-European blue-chip benchmark is about 2.5 per cent up on the week and has regained levels last seen in early January, cheered on by investors banking on economic recovery later in the year, particularly in the United States.
A regional Federal Reserve said yesterday the US economy is still set for a pick-up in the second half of 2003.
The DJ Euro Stoxx 50 index rose one per cent to 2,516 points. The Fed winds up a two-day meeting next Wednesday and is widely expected to lower US interest rates - already at four-decade lows of 1.25 per cent - by a quarter point, though some dealers were predicting a bigger cut.
However big a cut, stocks still face an uncertain time. "The risk is that it begins to potentially run out of steam as when the Fed does cut, people will ask what can the Fed do further to stimulate the economy and was that their last cut," said Andrea Williams, a fund manager at Royal London Asset Management.
Investors were also braced for the upcoming reporting season, and volumes typically shrink in July and August due to holidays.
"Markets in Europe look fair value by now and they could just drift a bit lower over the course of the summer period," Williams said.
On Wall Street, the Dow Jones industrial average rose 0.7 per cent to 9,249 points. The Nasdaq Composite was flat at 1,649 points, helping to drag European technology stocks lower.
Expiries in derivatives contracts linked to shares and indices on both sides of the Atlantic, and the volatile impact this can have, kept investors relatively subdued.
British business telecoms group Cable & Wireless rose four per cent to 105-1/2 pence, with dealers noting the group held an investor briefing.
Airbus plane maker EADS rose 3.5 per cent to 10.92 euros after investment bank Morgan Stanley selected it as top pick in the European aerospace and defence sector, rating the stock "overweight".
At the Paris air show this week, EADS has bagged many Airbus orders to beat off arch-rival Boeing of the United States.
In the negative column, French software group Business Objects sank 7.5 per cent to 18.92 euros, hit by downgrades from Merrill Lynch bank and others, citing worries over competition.
Scottish Widows Investment Partnership, which oversees about 70 billion pounds ($118 billion) of assets, said yesterday it had cut some of its exposure to equities in June after the recent market upturn and as investors switch their focus back to fundamentals.
On Europe, Scottish Widows said the stock rally still left European stocks looking to offer fair value both when compared to government bonds and when comparing prices with expected corporate earnings.