Paris closed higher for the sixth day running, lifted by the soaring retail and construction sectors. The CAC-40 index ended 13.34 or 0.3 per cent up at 4,642.71.

Retailers and construction companies prospered on news that the government planned to cut value-added tax on building maintenance. Retailers also benefited from hopes of good results in the sector.

Promodes was the top gainer on the CAC, climbing €44 or 6.7 per cent to €700. Its rival Carrefour, seen by some as a potential bidder for Promodes, rose €3.90 or 2.9 per cent to €140.30.

Frankfurt ended a subdued session with the Xetra DAX index up 31.02 at 5,420.36. The performance extended the net gain on the week to 3.2 per cent.

Motors were one of the livelier sectors. Volkswagen rose €1.15 to €58.49 after speculation the group was set to announce a takeover. BMW found takers after Salomon Smith Barney was said to have raised its nearterm target price. The shares rose €1.15 or 4 per cent to €30.05.

Lufthansa saw profit-taking, losing 30 cents at €18.69. Metals and leisure group Preussag was also weak, slipping 55 cents to €54.

Amsterdam ended with the AEX index 1.22 lower 584.89 for a net gain on the week of 3.5 per cent.

Telecoms leader KPN lost 40 cents at €43 ahead of Monday's interim results. Among financials, Fortis gained 40 cents at €32.30 after strong six-monthly figures.

Elsevier, having fallen behind the rest of the Dutch media sector, bounced on bargain hunting. The shares rose 45 cents or 4.3 per cent to €10.95.

Hagemeyer fell €1.40 at €24.80 for a two-day decline of 12.6 per cent after news of a slide into loss.

Madrid surged ahead of the rest of Europe, buoyed by a strong gain by market bellwether Telefonica. The general index ended up 11.06 or 1.2 per cent at 899.46.

Telefonica rose 39 cents or 2.5 per cent to reach €15.70 after underperforming on Thursday. Investors are buying in anticipation of the group's interim results on Wednesday. Repsol YPF, the oil group that is also due to announce results on Wednesday, rose 11 cents or 0.6 per cent to €19.86. Dealers expect its first-half net profits to fall about 35 per cent because of large exceptional costs.

Stockholm posted a third successive all-time high as strength among telecommunications and automotive stocks helped offset weakness in other sectors. The general index rose 1.99 or 0.1 per cent to 3,941.99.