Dutch electronics giant Philips wrong-footed investors who marked the shares down 3.3 per cent in early trade, after an 8 per cent tumble on Monday, on a worse-than-expected third quarter net loss. But a rebound came just as quickly when the group announced an improvement in semiconductor orders and its book-to-bill ratio. By the close, the shares registered a gain on the day of 5 per cent at €24.35.

William Wilson at Deutsche Bank said that while the market would view the third quarter results somewhat negatively, it would be difficult for sentiment towards the stock to deteriorate much more. "The stock remains . . . the most attractive value play of the European large caps," he said.

The news from Philips radiated to other European semiconductors. ASM Lithography, the world's leading chip manufacturing equipment maker, jumped 5.9 per cent to €16.16 as it said it would cut 1,400 more jobs to cope with reduced investments by semiconductor manufacturers. Germany's Infineon rose 5.6 per cent to €16.50 while France's STMicroelectronics, which reports tomorrow, was up 3.8 per cent at €30.02.

Elsewhere in the tech sector, electronics group Siemens gained 3.6 per cent to €49.40 but software maker SAP, which kicks off the German blue chip quarterly reporting season tomorrow, was 3.9 per cent lower at €123.86 as Morgan Stanley cut its earnings forecast for the group.

Alcatel swung higher, brushing aside bearish comment from Merrill Lynch and acting as an impressive pacemaker for a determined rally by the telecommunications equipment sector. Merrill claimed it was too early to call a bottom for European producers. It forecast that the French group would not see an upturn in demand until 2003. Alcatel surged 8.6 per cent to €15. Mobile handset leader Nokia also rallied, with a rise of 3.7 per cent to €21.20. Nokia unwraps third quarter results on Friday.