Europe roars back to life

Investors cash in chips as U.S. recovery stumbles and companies issue warnings

LONDON, England (CNN) -- European markets soared back from eight-month lows on Monday, led by tech and drug stocks, and buoyed by an early rally on Wall Street.

Product releases from telecom leaders Nokia and Ericsson, along with news from major pharmaceutical companies, lifted Europe out of last week's market slide that was prompted by concerns over the strength of the U.S. economic recovery and weak corporate profits.

Wall Street got a boost from fast food giant McDonald's, which delivered a more positive earnings outlook than investors had be growing used to in recent weeks. (Full story)

London's FTSE 100 rose 2.7 percent to 4,756.8; the FTSE benchmark index lost 3 percent of its value on Friday and 5.8 percent over the week. The CAC 40 blue chip index in Paris, which fell 4.4 percent last week, gained 4.4 percent to 4,010.36.

Frankfurt's electronically traded Xetra Dax, which fell more than 6.6 percent last week, was up 3.6 percent to 4,458.69 in late trading (the German market was set to close at 1900 GMT).

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The pan-European FTSE Eurotop 300, a broader index of the region's largest stocks, gained 3.4 percent, with the pharmaceutical, information technology, telecom and insurance sub-indices among the top gainers.

Despite the recovery on Monday, many analysts warned the positive sentiment may not last. (Full story)

"The outlook is still looking very grim for global stocks as the market remains increasingly downbeat about recovery prospects. There is growing market talks about a double-dip recession slipping back into the market again," investment bank Bear Stearns said in a research note.

"The focus is still on earnings concerns, corporate accounting uncertainties and acute geo-political worries too."

Nokia, which took much of the brunt of investors' dissatisfaction with the telecom sector, rose 5.9 percent to 14.05 euros. Swedish rival Ericsson -- also hit hard in recent sessions -- reversed its earlier gains to end down 3.3 percent to 17.40 crowns. Both Nokia and Ericsson's mobile phone joint venture Sony Ericsson launched new handset models on Monday in an effort to encourage consumers to upgrade their old handsets. (Full story)

Vodafone (VOD), the world's biggest mobile phone operator, rose 5.8 percent to 90.45 pence.

France's Alcatel (PCGE), the country's biggest telecom equipment maker, added 4.7 percent to 10.29 euros.

France Telecom (PFTE), the former state-monopoly, topped the leader board in Paris, jumped 6.1 percent to 16.81 euros, after reports that it was poised to sign a key refinancing agreement with creditor banks of its German affiliate MobilCom. (Full story) Deutsche Telecom (FDTE), Europe's biggest phone company by sales, was up 7 percent to 10.51 euros in late Frankfurt trading.

Pharmaceutical companies Aventis (PAVE) rose 7 percent to 73.60 euros, while AstraZeneca (AZN) gained 4.6 percent to 2,808.80 pence they said on Monday they would test their cancer medicines in combination for the treatment of solid tumours. (Full story)

Shire Pharmaceuticals (SHP) rose 7.6 percent to 562 pence, while GlaxoSmithKline (GSK) gained 5.7 percent to 1,400 pence.

The insurance sector was supported by stock upgrades. UK insurer Prudential (PRU) gained 4.4 percent to 577.59 pence, while CGNU (CGNU) added 4.7 percent to 538 pence after investment bank Morgan Stanley upgraded their stocks, saying the recent fall in insurance stocks made them attractive buys now.

Anglo-Dutch steel group Corus (CS) jumped 7.1 percent to 82.50 pence after falling 14 percent on Friday on rumours it would issue a profit warning, which the company denied.

UK bookmaker William Hill, jumped more than 7 percent to 241 pence, at the start of "conditional" trading in London. Despite weak market sentiment, its initial public share offering attracted strong investor demand amid a World Cup betting frenzy. (Full story)

In Amsterdam the AEX index rose 3.7 percent and Madrid's MIB30 gained 3.8 percent, while the SMI in Zurich added 3 percent.

In the U.S. on Monday, stocks rallied sharply in early trading, boosted by an upbeat forecast from McDonald's. Financial services stocks and telecom issues also helped lift markets.

At midday, the Nasdaq composite index was up 34.96 points, or 2.3 percent, to 1,539.7, while the Dow Jones industrial average rose 123.98 point, or 1.3 percent, to 9,598.19.