Renewed interest in technology leaders sent Frankfurt smartly ahead, with strong runs for SAP and Epcos leading the way.

SAP surged 7.4 per cent after announcing two major deals. It has clinched a big supply contract with Swiss foods giant Nestle and made a $250m investment in US business-to-business group Commerce One. SAP jumped €42.70 to €620.04 after touching a best-of-session €625.99.

News of Vivendi's bid overtures to Canada's Seagram media and drinks giant also brought the technology sector into positive focus.

Epcos rose €11.40, or 7.9 per cent, to €149.50 and Deutsche Telekom added €1.54 to €67.70.

Hopes for a more settled interest rate background following a further round of soft US inflation data lifted financials. Deutsche Bank added €2.83 at €90.38 and Dresdner Bank rose €1.13 to €47.35.

The Xetra DAX index was up 95.07 at 7,363.98 at 5.30 p.m. German time.

Paris ended higher as France Telecom rallied and investors took comfort from the latest US inflation figures. The CAC-40 added 1.1 per cent to 6,608.10. France Telecom was up 7.3 per cent to €169.60 after its chairman played down speculation that it was vying with Global Crossing to buy out Equant.

France Telecom's rise helped balance losses by media, communications and utility group Vivendi, which saw its share price plummet 10 per cent to €103.50. Analysts gave a mixed reception to confirmation of the group's merger talks with Seagram, a deal that would create a $100 billion-plus behemoth.

Canal Plus, which is 49 per cent-owned by Vivendi and is also involved in the negotiations, fell 3.4 per cent to €204.60.

Remy Cointreau was the best performer on the wider market, gaining 16.3 per cent to €30.80 after surprising investors with better-than-expected results. There was also speculation that it may be interested in acquiring some of Seagram's brands in the fallout from any merger.

Amsterdam rose 7.61 to 683.28 on the AEX index after a strong run for Philips. The electronics giant saw active trading as investors speculated on the value of its 11 per cent stake in Seagram. After reaching a session best of €112, the stock finished €2.50, or 5.1 per cent, higher at €51.80 in 12 million shares traded.