European markets ended a week in which the Federal Reserve again cut US interest rates with modest net gains.

The takeover premium that seeped away from Montedison earlier this year swung back into the reckoning amid talk that Italian motor leader Fiat was set to step into the bid saga.

Montedison ended 8.6 per cent higher at €3.31. Fiat shed 2.5 per cent at €23.16.

Technology shares rose for a second day, bouncing back after more than a month of falls. Nokia was up 3.9 per cent to €26.50 and STMicroelectronics rose 6.25 per cent to €41.

Alcatel gained 3.5 per cent to €24.70 and announced it was seeking buyers for its components businesses, in line with the chief executive's statement of Wednesday that it would cut the number of plants from 120 to a dozen or less.

Philips was up 4 per cent to €31.31 on news that it would get €500 million for the redemption of its shares in Korea's LG Electronic.

But software group SAP fell 1.75 per cent to €163.10, having announced it had lifted its stake in Commerce One, a US e-commerce software company, from 4 per cent to 20 per cent. The extra 16 per cent cost it $225 million, less than the $250 million it paid last year for the first 4 per cent, thanks to falling share prices.

However, on Thursday Commerce One warned that poor economic conditions would limit second quarter sales to $100-120 million, compared with analysts' consensus forecasts of $162 million.