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European markets supported by tech stocks, carmakers

European stocks rallied to a stronger finish on Friday, led by automakers and technology stocks, though insurance giant Allianz declined after its results disappointed.

The German Xetra DAX 30 index ended up 1.5 percent at 5,090, France's CAC 40 index gained 1.3 percent to 4,536 and the UK's FTSE 100 index added 0.8 percent to 5,465.

German shares are being driven by corporate earnings, said Commerzbank European equity strategist Joelle Anamootoo, noting that some positive comments from utility E.On with its results on Thursday helped lift valuations.

She said momentum is expected to continue for the rest of the year as most companies have been positive on their guidance to investors.

Banking and insurance giant Allianz was the only decliner in the DAX index, closing down 0.9 percent after it said third-quarter net income rose 70 percent, reflecting strong growth in life insurance and asset management and a 753 million euro (US$885.7 million) charge from the recent hurricanes in the US and floods in Europe.

DaimlerChrysler, which said it was selling its remaining stake in Mitsubishi Motors, ended up 1.6 percent.

Volkswagen ended up 1.9 percent in Frankfurt after saying it's still targeting a pretax profit of 5.1 billion euros in 2008. VW also said a probe by auditor KPMG into a bribery and kickback scandal has uncovered a 5 million euro drain on the company's finances.

Technology stocks such as STMicroelectronics and Nokia also were among advancers.

STMicro closed up 3.4 percent in Paris after Merrill Lynch upgraded it to buy. Merrill said substantial margin expansion for the European chipmaker over the next two years will continue to support shares.

Most European airline stocks gained ground on weaker crude oil prices, though Italian flag carrier Alitalia dived 11 percent after it said it will issue shares to raise 1 billion euros and spin off its ground services into a new unit by selling a stake to state-owned Fintecna.

The Independent newspaper reported that the unit will be hived off into the joint venture with Fortis' investment arm, though the report discounted rumors Scottish Widows will be sold off altogether.

Telefonica SA, the Spanish telecom giant that recently bid ?17.7 billion (US$31.4 billion) for UK mobile operator O2, dipped 1.3 percent in Madrid, continuing a slide that started when the deal was first announced.

The drop continued despite news that it was lifting revenue guidance for this year after nine-month profit rose 36 percent and revenue grew 24 percent.
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