The Frankfurt market was closed as Germany marked the 10th anniversary of reunification. The euro was buying 0.8773 dollars. Trading in Asia had been similarly reserved, with Tokyo share prices closing up 0.1 per cent and the Hong Kong market up 0.5 per cent. Worries stemming from profit warnings issued by several companies in recent days had nagged at the US Nasdaq index on Monday, though the Dow Jones Industrial Average ended slightly higher.

Investors are also cautious because US, British and European monetary authorities are to decide on interest rates this week. But some companies, particularly in the booming oil sector, were racking up gains on the back of the latest rally in the oil price. Anglo-Dutch giant Shell added 2.5 per cent to 571 pence, while BP Amoco put on 2.2 per cent to 618.5 pence.

In Paris, TotalFinaElf gained 1.3 per cent to 172.80 euros. British bank HSBC also surged, amid persistent rumours - denied by the bank - that it was holding merger talks with US Finance house Merrill Lynch. HSBC stock gained 2.2 per cent to 981 pence. The Paris market was led higher by utilities group Vivendi, which unveiled strong growth in first-half profits, particularly in its telecoms operations. Vivendi stock rose 2.7 per cent to 88.20 euros.

European Defence giant EADS was another gainer, adding more than four per cent to 20.89 euros as investors piled back into a stock that has been out of favour recently. Attention focussed once again meanwhile on the fate of the London Stock Exchange itself, after Sweden's OM Group said that its unsolicited bid for the venerable market had found support from just one percent of shareholders.