Europe recovers on U.S. data

LONDON, England (CNN) -- European markets ended the week in positive territory after gaining strength late on Friday following upbeat economic data out of the United States.

London's FTSE 100 gained 0.4 percent to 4,227.3 and the CAC 40 blue chip index in Paris rose 1 percent to 3,366.21, while Frankfurt's electronically traded Xetra Dax was down 0.7 percent to 3,686.6 in late trading (the German market was set to close at 1800 GMT).

The pan-European FTSE Eurotop 300, a broader index of the region's largest stocks, was up 1.6 percent, with the computer and telecom sub-sectors among the top gainers.

After dipping lower in mid-afternoon trading, European markets recovered when the Chicago Purchasing Managers Index showed a better-than-expected rise in August -- up to 54.9 from 51.5 in July -- indicating manufacturing activity in the U.S. was picking up. (Full story)

"The market likes that because the Chicago PMI is a lead indicator for the ISM [Institute of Supply Management] and it is pointing back to growth rather than a pathetic recovery or, even double-dip recession," David Thwaites, pan-European strategist at BNP Paribas, told Reuters.

Nestle, the world's biggest food group, jumped 6.3 percent to 327 Swiss francs after its chief executive Peter Brabeck dismissed as "fantasy" the idea that U.S. anti-trust officials would allow it to acquire U.S. chocolate maker Hershey Foods. (Full story)

Vivendi Universal (PEX), the world's second-largest media company, gained 1.6 percent to 12.80 euros. The Financial Times said U.S. private equity groups Blackstone and Thomas H. Lee have emerged as lead bidders in the $1.5-$2 billion auction of Houghton Mifflin, its U.S. publishing arm.

Ericsson, the world's biggest mobile phone telecom equipment maker, rose 1.4 percent to 7.15 crowns. The Swedish company said it would pull out of handset-making and end its joint venture with Japan's Sony if it did not deliver in the next two or three quarters. (Full story)

Insurers rebounded from a battering the previous session. Dutch Aegon added 0.7 percent to 14.60 euros, while France's Axa rose 0.9 percent to 13.96 euros. Germany's Munich Re was up 2.2 percent to 182 euros in late Frankfurt trading and Swiss Re gained 0.9 percent to 107 Swiss francs after both shares fell on Thursday following weak results.

But traders said much of the buying ahead of the Labor Day holiday in the U.S. on Monday was due to investors "short selling" -- buying stocks to replace those previously borrowed. Short sellers often close their positions ahead of a holiday in case of unexpected news which may drastically alter market sentiment.

The AEX index in Amsterdam rose 1.6 percent and Milan's MIB30 index gained 0.8 percent, while the SMI in Zurich added 2 percent.