European technology stocks surged as investors scrambled to cover short positions following the US rate cut.

The IT sector rose more than 11 per cent on the FTSE Eurotop 300. Ericsson and Nokia were two of the strongest gainers, with Ericsson closing more than 13 per cent higher at €12.41.

At one point the Helsinki stock exchange raised Nokia's ceiling for daily price rises from 15 per cent to 20 per cent because of heavy brokerage demand. The share price later slipped back to end 11.3 per cent higher at €46.48.

In France there were a number of sharp tech gains, including telecoms equipment maker Alcatel, up more than 12 per cent to €61.35, chipmaker STMicroelectronics, up 12 per cent to €44.96, and software developer Dassault Systemes, up 12.6 per cent to €71.70.

One major exception to the trend was the German business software maker SAP, which resumed its downward plunge as the market continued to ponder Deutsche Bank's statement of Wednesday that "it did not rule out a profit warning in the next couple of weeks". SAP fell 8 per cent to €130.90.

Telecoms were also strong beneficiaries of the interest rate rally. The sector as a whole rose more than 6 per cent, with KPN out in front on 17.4 per cent at €15.20 and Sonera close behind on 14 per cent at €21.02.

France Telecom gained 7 per cent and Telefonica more than 8 per cent. Deutsche Telekom was 1.8 per cent higher at €34.50, although that is still only a third of its €104.90 peak.

Most European telecoms are 50-75 per cent down from their highs, but the media sector contained the overall European winner in percentage terms.

UPC, the Dutch cable group, surged almost 30 per cent to €12.25. In the UK, Reuters rose 10 per cent to 1,127p and WPP Group was up 12.5 per cent to 887p.

In Italy, Mediaset rose 6.8 per cent to €12.40 and Seat Pagine Gialle rose 3 per cent to €2.02.