Bourses staged a rally on news that the European Central Bank was keeping its key money market rate unchanged despite the British interest rate rise announced on Wednesday.

The Eurobloc 100 index rose 9.05 or 0.8 per cent to 1,110.89, the Eurotop 100 climbed 29.40 or 1 per cent to 3,041.58, while the Eurotop 300 closed 13.34 or 1 per cent higher at 1,334.

Paris broke through to a closing high as investors reacted to a series of better-than-expected company results. Michelin was the top gainer and the most heavily traded stock after it revealed a big rise in first-half profits and plans to cut its workforce. It rose €5.33 or 12.6 per cent to €47.75.

Alcatel, the telecommunications group, rose €6 or 4.4 per cent to €143 after it revealed a less-severe-than-expected fall in interim earnings.

In Germany, Dresdner Bank barely flickered following a press report that it was in talks with Banque Nationale de Paris. The French bank subsequently denied the story and Dresdner ended off 79 cents at €43.22.

In general, banks were dull, unsettled by the monetary outlook. Although the European Central Bank made the expected "no change" announcement about interest rates, it made it clear that a tightening bias was on the cards.

Heavyweight Royal Dutch supplied most of the upward momentum in Amsterdam, rising €1.80 to €60.95. Heineken

dipped 10 cents to €50.45 in spite of an earnings upgrade at Lehman Brothers which set a target price of €60 for the shares.

Zurich turned higher in early afternoon trade, helped by the positive tone in neighbouring markets, which prompted selective buying of blue chips. The SMI index ended 33.5 higher at 7,193.7.

Milan picked up from early lows as strong gains in energy group Edison and its parent companies helped lift the market. The Mibtel index finished 102 higher at 24,030.