European markets were led higher by technology stocks which rallied for a second successive day.

Chipmakers were surprisingly strong, in spite of profit warnings from several mid-size US companies. The gloomy news was outweighed by an overnight rise in the Philadelphia Semiconductor Index.

STMicroelectronics rose 7.5 per cent to #39.88, making a rise of 25 per cent in the last three sessions. Infineon rose 5.4 per cent to #40.80 and ASM Lithography was up 10.9 per cent at #26.55.

Analysts at Deutsche Bank published a list of technology stocks whose share prices have recently fallen to levels at which they "see value", using their Croci (cash return on capital invested) model. In telecoms equipment they identified Alcatel and Nokia and in semiconductors, Philips.

These blue chip stocks all participated strongly in yesterday's rally. Alcatel rose 6.7 per cent to #47.65, Nokia was up 4.6 per cent to #28.85 and Philips rose 5.5 per cent to #39.16.

French software company Dassault Systemes stood out in a technology-strong crowd, closing 9 per cent up at #59.30 after being 13 per cent ahead at mid-session.

The sentiment was strong enough to neutralise gloomy words from Germany's electronics group Epcos, which cut its sales growth forecast for this year from 25 per cent to 20 per cent, the second time this year it has reduced its outlook. Epcos, a major supplier of equipment to mobile phone makers, said orders in the past eight weeks had been weak. Epcos's shares nevertheless rose 3.7 per cent to #70.88.

France Telecom was up 5.2 per cent to #68.45 after announcing a move to cut its short-term debt by issuing the biggest ever corporate bond, worth up to #16 billion.

Dutch retailer Ahold, the world's third biggest supermarket operator, reported a 48 per cent rise in net profit for 2000, in line with analysts' expectations. Earnings per share rose 32 per cent to #1.51, topping a market consensus of #1.46-#1.50.

Ahold forecast a 15 per cent rise in earnings per share for 2001. The shares, which have risen steadily from #30 in mid-January, fell 2 per cent to #34.82 as investors took profits.