Despite a late bout of profit-taking, Paris managed to hold on to most of its session gains, hitting its first life high this year. The CAC-40 closed 106.50 or 2.5 per cent higher to 4,390.92, posting the biggest rise in Europe, albeit in subdued trading volumes. Index heavyweights provided most of the support, with France Telecom continuing to recover, up €2.65 to €79.25.
Renault rose robustly, adding €1.95 or 5.3 per cent to €38.90 after Mr Louis Schweitzer, its chairman, hinted the company might sell its stake in the troubled truck manufacturer Nissan Diesel.
Defence stocks were boosted by the military intervention in Kosovo and hopes of renewed merger and acquisition activity in the sector. Lagardere, due to cede its defence unit to state-controlled Aerospatiale, rose €3.09 or 9.3 per cent to €36.50 while Thomson CSF added €1.05 to €29.30. Synthelabo and Sanofi rose healthily following a sharp drop last month when the European Commission decided to withdraw its approval for their merger.
Traders said the rise suggested Synthelabo's decision to sell part of its activities may allow the project to go ahead. Sanofi was up €9.90 or 6.8 per cent to €154.90 while Synthelabo advanced €17.50 or 9.4 per cent to €203.
Canal Plus emerged as one of the day's few losers, down €5.70 to €273 after Telecom Italia sold a stake in its pay television operation to News Corp.
Frankfurt rose 95.69 to 5,364.81 on the Xetra DAX index for a two-day advance of 2.4 per cent. Banks were a strong market. Dresdner rose €2.74 to €41.39 while Deutsche Bank surged in heavy volumes following the pricing of its rights issue. The share issue was priced at €50 and the stock ended €2.54 better at €53.95 in 4.6 million shares traded.
Elsewhere among the heavyweights, Deutsche Telekom was the subject of mounting speculation that the planned merger with Telecom Italia would eventually be abandoned on regulatory grounds. Telekom jumped €2.01 to €37.90.
Retail giant Metro, which stood at €78.30 earlier this year, bounced €3.62 to €67.68 European markets continued to rise yesterday, helped by a strong start on Wall Street and signs that the Serbian leadership was beginning to fracture over NATO's intervention in Kosovo.
