Buoyed by upbeat technology stocks, Paris pushed steadily higher throughout the session. The CAC 40 index up 120.3 or 1.9 per cent at 6,325.49.

France Telecom's €40 billion purchase of UK mobile phone operator Orange sent the TMT sectors racing ahead from the start and by the finish, supported by a strong start for the Nasdaq, gains of more than 4 per cent were widespread.

Thomson-CSF led the performance charts on a combination of broker optimism following this month takeover of Racal Electronics of the UK and vague alliance talk. The stock rose €3.49 or 9.2 per cent to €41.60.

Alcatel surged €3.50 to €59.20 and Canal Plus €16.70 to €205. Equant put on €1.64 to €47.89. Bouygues, up €19 at €644, was once again seen as a takeover target. Vivendi, which is set to sell its stake in America Online France, added €5.30 at €111.80.

France Telecom rose to €149.90, but fell back to close up €4.50 at €148.90 on confirmation that it was to buy Orange from Vodafone AirTouch.

The deal was seen as showing that telecoms valuations remained robust.

Retailer Pinault-Printemps rose €8.30 to €228.70, but for the most part old economy stocks were sidelined while some made heavy losses. Cement leader Lafarge lost €3.10 at €83. Hotels group Accor fell €1.91 to €42.66.

Frankfurt ended 102.60 higher at 7,119.26 on the Xetra DAX index with market heavyweight Deutsche Telekom leading the way up with a gain of €2.58 or 4.1 per cent to €65.

Reports that it was one of several predators stalking Freeserve, the UK internet service provider, continued to buoy T-Online. The shares rose 70 cents to €38.45 for a two-day gain of 4.2 per cent.

A better day for the euro helped promote the idea that the European Central Bank was turning less hawkish on interest rates. Deutsche Bank put on €1.80 at €80 and Dresdner €1.62 at €43.90.

Viag fell €1.26 or 5.5 per cent to €21.79 and Veba €1.85 to €54.65 amid renewed concern about regulatory approval for their planned merger.