Europe warms to Nokia warning

Investors see some positive signs in Nokia's latest market update

LONDON, England (CNN) -- European markets ended higher on Tuesday as investors on both sides of the Atlantic warmed to a Nokia update and bought up telecom-related stocks.

London's FTSE 100 rose 0.1 percent to 4,934.7 and the CAC 40 blue chip index in Paris climbed 2.1 percent to 4,109.37, while Frankfurt's electronically traded Xetra Dax was up 1.8 percent to 4,671.89 in late trading (the German market was set to close at 1900 GMT).

The pan-European FTSE Eurotop 300, a broader index of the region's largest stocks, gained 1.1 percent, with the auto sector among the top gainers, along with techs and telecoms.

Nokia, the world's biggest mobile phone maker, rose 5.6 percent to 14.06 euros after falling initially on Tuesday when it cut its sales target due to a weak handset market and a reluctance by telecom operators to spend money but stuck to it earnings forecast. (Full story)

"Nokia was not as bad as it might have been. We are looking at a company which was already one of the heaviest losers over the last 18 months, which has more or less confirmed that they think they've found a way up again," Gert-Jan Geels, fund manager at Eureffect Asset Management, told Reuters.

However, Swedish rival Ericsson, Europe's third-largest mobile phone maker, was among the few stocks affected by the warning, falling 5.6 percent to 18.40 crowns.

"These kinds of results will affect Ericsson where 60 to 70 percent of sales are in networks. So if Nokia sees a massive decline in networks, Ericsson will be hit harder," Raj Karia, an analyst at Cannacord, told Reuters.

Many telecom stocks rebounded from the initial shock of the Nokia warning. Among them, was French telecom equipment maker Alcatel (PCGE), which was up 1.5 percent to 11.04 euros. German electronics and engineering giant Siemens (FSIE) also recovered, gaining 1.8 percent to 64.40 euros.

France Telecom (FTE) jumped 8.3 percent to 18.85 euros, while its mobile phone unit Orange (PORA) gained 6.2 percent to 5.96 euros. BT Group (BT) rose 4.3 percent to 279.31 pence and Vodafone (VOD), the world's biggest mobile phone operator, added 2.6 percent to 99.83 pence.

Deutsche Telekom (DTEG), Europe's biggest telecom operator by sales, was up 5.6 percent to 10.78 euros in late Frankfurt trading.

France's Cap Gemini (PCAP), Europe's biggest computer service company, gained 2.3 percent to 52.10 euros, while UK chip designer ARM Holdings (ARM) was the top gainer in London, rising 5 percent to 170.41 pence. German software giant SAP (FSAP) was up 3.5 percent to 115.90 euros in late trading

In the auto sector, Fiat, Italy's biggest industrial group, rose 6.2 percent to 13.70 euros in Milan after Chief Executive Paolo Cantarella resigned on Monday as sales dropped sharply and losses soared at its carmaker Fiat Auto. (Full story)

France's Renault (PRNO) gained 5 percent to 52.50 euros after Lehman Brothers raised its price target to 62 from 52 euros. DaimlerChrysler (FDCX) was up 2.7 percent to 50.65 euros, while BMW (BMWG) added 2.4 percent to 45.30 euros in late Frankfurt trading.

TF1, France's top commercial broadcaster, rebounded from earlier losses after France went out of the World Cup after losing to Denmark on Tuesday. TF1, which bought exclusive French rights to broadcast the World Cup for 60 million euros, was up 4.8 percent to 31.40 euros in Paris. (Full story)

In Amsterdam the AEX index rose 1.8 percent and Milan's MIB30 index gained 2.7 percent, while the SMI in Zurich added 1 percent.

In the U.S. on Tuesday, financial markets got an earlier boost from Nokia's bad news/good news sales and profit update. Adding to the positive sentiment in the sector was Nextel Communications, which said it was on track to meet full-year earnings projections.

In late morning trading, the Dow Jones industrial average was up 92.15 points, or 1 percent, to 9,737.55, while the tech-heavy Nasdaq composite gained 13.27 points, or 0.9 percent, to 1,543.96.