European technology stocks continued to be bolstered by Merrill Lynch's upgrade of the global semiconductor industry on Wednesday.

News yesterday that global chip leader Intel's president, Mr Craig Barrett, had said the world's computer industry was past the worst added icing to the cake.

Among German tech stocks, SAP rose 1 per cent to #171.70, Siemens gained 1.4 per cent to #65.41 and Infineon was 1 per cent higher at #29.90.

Germany's ACG led surging chip stocks on the Neuer Markt as investors continued to pile back into the sector.

The shares jumped 4 per cent to #7.90, extending gains since the start of the week to more than 20 per cent. Even so, the stock remains some 80 per cent below its high for the year.

Spain's Terra Lycos jumped 8.4 per cent to #8.79, its best level for a month. The rise was attributed to Wednesday's news that its German competitor, T-Online, had posted a smaller than expected core operating loss for the second quarter, which added to hopes for a sector recovery. T-Online dipped 2.2 per cent to #8.79.

French internet TV company Netgem leapt 32.9 per cent to #5.94, extending a week-long advance which the company attributed to investor realisation of the potential of digital television. The shares had plunged 25 per cent to a record low of #2.10 on July 25 after the company said first-half sales tumbled to #11.5 million from #43.1 million a year earlier, and also forecast a first-half loss.

German information technology provider Prodacta, by contrast, tumbled as it filed for insolvency proceedings after failing to reach an agreement with shareholders and potential investors. The shares were down 41.7 per cent at just 35 cents.

French IT consultancy Cap Gemini edged up 0.6 per cent to #83 as investors regained confidence in the stock after June's profits warnings, and concentrated instead on an expected turnaround in the fourth quarter.