In Frankfurt, the DAX was trading at 7,267.15, 34.74 points higher, while the Paris CAC-40 crept up 3.73 points to 6,505.43. In Asia, Tokyo's Nikkei 225 index ended the session 234.17 points higher at 16,670.82, while Hong Kong's Hang Seng gained 12.30 points to 17,439.70.

Overnight on Wall Street, the Dow Jones Industrial Average finished the session 5.50 points firmer at 11,144.65. The technology-rich Nasdaq composite climbed 52.80 points to 4,011.01.

In London, gains were undermined by disappointing corporate news.

Rolls-Royce came under pressure after a cautious outlook statement with its interim results. The share was trading 39.25 pence lower at 179.25 pence.

Diageo lost 5.5 pence to 597.5 pence after a report in the Financial Times suggested that France's Moet Hennessy-Louis Vuitton is preparing to divest its remaining stake in the group.

Sainsbury slipped back four pence to 346, as sentiment in the sector was affected by a profits warning from US group Albertson's late Wednesday. The group also remained under the spotlight following confirmation on Wednesday that it is sounding out bidders for its Homebase unit.

Prominent gainers included technology stocks, supported by Nasdaq's overnight strength. ARM Holdings gained 19 pence to 748 pence, Baltimore Technologies rose by six pence to 670.5 pence and Sage gained 17 pence to 612.

Telecom stocks rallied from previous losses inspired by concern about the cost of next-generation mobile phone licences. Market heavyweight Vodafone gained 1.75 pence to 255.75. In Frankfurt, Deutsche Telekom gained 0.72 euros to 43.12 euros and in Paris, France Telecom was 1.60 euros higher at 125.50 euros.

Jakarta shares plunge 4.1% on renewed political fears
Jakarta: Jakarta share prices plunged 4.1 per cent on panic selling on Thursday amid renewed fears of escalating political tensions following wide criticism of Indonesia's new cabinet lineup, dealers said.

The Jakarta Stock Exchange composite index closed down 20.743 points at 482.653 with volume of 1.2 billion shares worth 590.7 billion rupiah ($70.1 million). They said the domination of President Abdurrahman Wahid's allies and retired military officers in the cabinet raised fears of a rift between Wahid and Vice President Megawati Sukarnoputri.

The cabinet announcement, late Wednesday, triggered panic selling across the board as the line-up failed to satisfy market expectations, a sales director of European brokerage said.

"The market fall is too much .... everything is just tumbling. It seems that no one could accept the new cabinet," he said. "I don'T know if the President really cares about market reaction. If he respects the market, then why would he choose people the market does not like?"

The sales director said that with negative sentiment dominating the market, it was easily affected by rumours, including one on the possible resignation of the vice President, and another on the possible replacement of new Finance Minister Prijadi Praptosuhardjo. He said that while the capability of the cabinet has yet to be tested, the market lacked the patience to wait.

Declines swamped advances 183 to 12. The rupiah also fell to reach 8,410 to the dollar, off a low of 8,520, around the close of trade from around 8,308 a day earlier. Another analyst said the rumours about Megawati's resignation really scared investors.

"Her resignation would be much more serious than anything else about the new cabinet, because if she resigns, then the whole government and Wahid's power would collapse," the analyst said. Telkom was down 130 rupiah to 3,040, Indosat lost 440 rupiah to 8,230, cigarette-maker Gudang Garam was down 535 at 13,200 rupiah while rival Sampoerna dropped 420 to close at 12,950. Astra International shed 315 rupiah to 2,625 as Indofood was down 240 to close at 3,910. AFP