Frankfurt closed at a high for the year in spite of a sharp pull-back at Volkswagen. The Xetra DAX index closed with a gain of 38.83 at 5,519.05.

Volkswagen, Europe's largest motor manufacturer, dropped €1.90 to €61.50. Confirmation that Deutsche Bank had cut its recommendation on the stock outweighed Thursday's news that the company had achieved its best June sales in the US for 26 years. Deutsche Bank said it was also cutting its 1999 and 2000 earnings forecasts on the company, which is expected to release first-half sales figures at the end of this month.

DaimlerChrysler also shifted into reverse, closing down €1.26 to €85.60, in response to figures showing that its US sales slipped 5.3 per cent in June.

Financials regained their poise after an early dip. Deutsche Bank finished 49 cents higher at €61.46 as Dresdner Kleinwort Benson raised its price target on the stock to €69. Dresdner Bank put on 30 cents to €38.90 and Commerzbank was 95 cents higher at €30.95.

Paris ended at an all-time high, with relief about US interest rates outweighing steep falls in the three big banks involved in a complex takeover dispute.

The CAC-40 index closed 11.41 or 0.2 per cent higher at 4,620.67, making a gain for the week of 4.6 per cent.

Banque Nationale de Paris (BNP), Societe Generale and Paribas came under pressure, reflecting uncertainty about the outcome of their takeover battle. BNP has made hostile bids for each of the other two companies in an attempt to thwart their plan to merge.

BNP fell €3.15 or 4 per cent to €76.25, Societe Generale dropped €8.4 or 4.8 per cent to €167 and Paribas ended €4 or 3.6 per cent lower at €108.

Zurich put in another strong showing after Thursday's convincing advance. The SMI index finished 114.7 higher at 7,206.2, with financials remaining in the spotlight.

Milan failed to raise much enthusiasm. By the close the Mibtel index was just four easier at 24,828.

Alitalia and Finmeccanica bucked the trend on news that the government's four-year macroeconomic plan expected the privatisation of the two companies to be completed in the first half of 2000. Alitalia and Finmeccanica each put on 2.2 per cent, to €2.60 and 91 cents respectively.

Helsinki closed at an all-time high for the second day running as Nokia, the telecommunications group, continued to surge. The Hex index ended 148.64 or 1.9 per cent up at 7,997.77.