Autos and Techs Drive Eurostocks Rally - We are Happy

LONDON Reuters reports that Autos and technology shares powered European stock markets on Friday, extending the rally to a fifth session, with all eyes on firm Wall Street futures ahead of a crucial batch of U.S. economic data.

At 6:30 a.m. EDT, the pan-European FTSE Eurotop 300 index was ahead 1.6 percent and the blue-chip DJ Euro Stoxx 50 up two percent, both near session highs.

Both indices have gained about 16 percent from last Friday's three-year lows, but still stand some six percent lower since the September 11 attacks in New York and Washington.

Nasdaq 100 futures were up 1.6 percent, and S&P 500 futures 0.7 percent higher, pointing to a stronger start on Wall Street on top of Thursday's late-session recovery.

Those indications could change dramatically, however, if U.S. gross domestic product or consumer confidence figures -- due later in the session -- contain any surprises.

``We were expecting the market to rebound and it has, but I don't expect it to be sustained,'' said Jeff Currington, head of European equities at Morley Fund Management.

Currington said some fund managers were adding to equities at the expense of cash as the third quarter came to a close, but good values were tougher to find. Defensive sectors like drugs or food which normally perform well in tough economic times were already richly valued, he said.

``What we're trying to do at the moment is look at valuation levels and try to find things which are either relatively defensive and not too overpriced, or reasonably exposed to the economy but attractively valued,'' he said. ``It's more valuation than sector based.''

AUTOS, TECHS UP

They went on to report that all of the DJ Stoxx sector indices were higher, with autos and techs leading the way, up more than three percent apiece.

BMW jumped 4.2 percent as Deutsche Bank raised its rating on the stock to ``buy'' from ``market perform.''

The sector had been under pressure since the September 11 attacks in New York and Washington, which raised more concerns about a U.S. and global recession.

DaimlerChrsyler added 3.2 percent while Peugeot gained 5.2 percent.

Philips Electronics climbed 6.3 percent, leading technology shares higher after a bruising session on Thursday, despite yet another chip sector profit warning, this time from Japan's NEC.

Telecom equipment makers Ericsson and Nokia each gained more than three percent.

``The recovery we have seen in the last few days will go on,'' said Achim Matzke, an analyst at Commerzbank in Frankfurt, adding that volatility would likely remain high as fund managers make final portfolio adjustments on the last trading day of the third quarter.

``War fear is subsiding. You have support from the monetary policy, so it is not a surprise that interest rate-sensitive shares are leading the recovery in Europe,'' he said.

SCHNEIDER, LEGRAND TUMBLE

Other active stocks included French electrical equipment maker Schneider and peer Legrand, which each shed 20 percent after European Commission officials recommended their merger be blocked. Both were halted limit-down earlier.

Telecom Italia tacked on 5.6 percent after acquirer Pirelli

announced a restructuring plan for the telecoms group.

The plan calls for Telecom holding firm Olivetti to slash its debt with the help of six billion euros in asset sales and a four billion euro capital increase.

Pirelli shares were 5.3 percent higher, while Olivetti gained 6.3 percent.

DATA WATCH

A raft of U.S. economic data due later in the session kept morning volumes relatively thin. The Commerce Department issues final second-quarter gross domestic product figures at 1230 GMT, while the University of Michigan consumer confidence survey is expected at 1400 GMT.

The data -- the last major figures before the Federal Reserve's next rate-setting meeting on Tuesday -- will be closely watched as investors try to gauge the depth of a U.S. economic slowdown. Many economists have said the world's biggest economy is already in a recession.

Economists in a Reuters survey on average forecast GDP growth of 0.1 percent, compared with 0.2 percent in the preliminary estimate.

The University of Michigan's final September consumer sentiment index was expected to give a reading of 79.6 compared with 91.5 in the final August report.

Earlier in the week, another report showed a steep drop in confidence, although markets rallied as the figures came in better than the most bearish forecasts.

Before the September 11 attacks in New York and Washington, consumer spending was a key prop for the ailing U.S. economy. In the weeks following the deadly attacks, top retailers have warned of a steep drop in spending, adding to recession worries.