Banks lead Frankfurt advance after euro gains

European markets closed modestly higher as the euro regained some ground after Mr Otmar Issing, European Central Bank chief economist, said he believed the currency could strengthen significantly.

The FTSE Eurobloc 100 index closed 5.68 higher at 1,135.56. The FTSE Eurotop 100 ended 2.90 higher at 3,122.05 while the broader FTSE Eurotop 300 settled 1.73 higher at 1,357.13

Frankfurt pushed up to a high for the year as banks gave a lead after Morgan Stanley Dean Witter lifted its 12-month price targets on Deutsche Bank and Hypo-Vereinsbank.

At the same time, Deutsche Bank forecast that the Dax index could rise as high as 6,350 this year, about 12.6 per cent above the current level. The Xetra Dax index put on 31.85 to 5,638.95.

Deutsche Bank put on €2.29 to €66.45 as Morgan Stanley upped its 12-month price target to €72.30 and HypoVereinsbank was €2.82 higher at €68.32 as its target was set at €80. Dresdner Bank climbed €2.99 to €46.

The car stocks were also in focus. DaimlerChrysler put on 75 cents to €88.65 as it sold its 32.4 per cent stake in telecoms company Debitel to Swisscom.

Porsche shot up €100 to €2,500 after the sports car group said current year sales would exceed DM5.5 billion and profits would rise.

Paris rallied from an early decline as STMicroelectronics, the semiconductor manufacturer, powered the market forward.

The CAC-40 index, off 0.4 per cent at one stage, closed 16.70 or 0.4 per cent up at 4,647.83. STMicro, one of the best performing stocks in Europe over the past nine months, ended €4.50 or 6.8 per cent higher at €71 on reports of higher microchip prices in Taiwan.

Amsterdam edged forward, lifted by strong showings from several blue-chip stocks. The AEX index ended 8.10 or 1.4 per cent higher at 586.89, just off its high in July last year of 597.01.

Fortis, the financial group, rose €1 or 3.3 per cent to €31.40 after J.P. Morgan issued a "buy" note.

Numico, the specialist foods group, climbed €1.35 or 3.6 per cent to €38.35 as investors continued to react positively to its takeover of General Nutrition Companies, the US food supplement maker.