LONDON (CNNfn) - Europe's top three markets rallied to close sharply higher Friday as further gains on the U.S. Nasdaq spilled over into Europe, drawing buyers to 'new economy' stocks in the technology and telecom sectors.
London and Paris shot up nearly 2 percent, withstanding pressure from a sluggish start for the Dow industrials, while Frankfurt advanced 1.5 percent and Milan soared more than 3 percent to a record. Only Zurich fell.
Europe's markets had pared their gains following a weak start on Wall Street but sprinted back up as the Nasdaq gained momentum. In currency markets, the euro retreated against the dollar amid fading chances for a near-term interest rate hike in the euro-zone.
The benchmark FTSE 100 ended up 111.3 points, or 1.8 percent, at 6,198.0, bolstered by its heaviest component, Vodafone AirTouch and a rash of short-covering. In Paris, the blue-chip CAC 40 also finished 1.8 percent higher at 6,188.64, with technology, tech and media stocks leading the way. The electronically traded Xetra Dax climbed 1.3 percent to 7,738.68, while the leading Mib-30 index in Milan raced up 3.2 percent to a record 49,590. The Ibex-35 in Madrid ended up 2.7 percent at 12,690.9.
 The SMI in Zurich was the lone contrarian among the big-four markets, falling 0.8 percent Friday. The SMI also was down 0.8 percent, or 57.9 points for the week. By contrast, London's FTSE 100 rose half a percent, or 33 points, for the week, while Paris blue chips advanced 2 percent and Frankfurt's Xetra Dax gained 2.1 percent from last Friday's close.
The euro dipped below 98 cents, stretching its losses to around 3 percent from a one-month high hit this week, after European officials issued comments suggesting a rate-hike may not be imminent.
European markets shrugged off a slump on Wall Street on the back of stronger-than-expected U.S. gross domestic product data for the fourth quarter.
 The pan-European FTSE Eurotop 300, a broader index of the region's larger stocks, leapt 2.1 percent to 1,575.37, led by sharp gains in the food and drug, health- care, telecom, water, information technology and oil and gas segments.
New economy stocks continued to curry favor with investors as cash flowed into markets.
 "There's so much liquidity in the markets" that is pouring into the new economy stocks, said Peter Oppenheimer, an equity strategist with HSBC Securities in London, describing gains in such shares as "momentum driven". Oppenheimer said that although anxiety about U.S. interest rates persisted, euphoria surrounding technology and telecom stocks is outweighing such fears.
Among London stocks, Vodafone AirTouch (VOD), the most heavily weighted blue-chip component following a new reweighting Wednesday, lent crucial underpinnings of support with a 2.3 percent rise. The mobile-phone operator currently represents 13.9 percent of the FTSE 100 weighting, reflecting its jump in size after winning its bid to buy Germany's Mannesmann. Rival British Telecommunications (BT-A), benefiting from the sector rally, leapt 5.1 percent, while Cable & Wireless (CW-) gained 8.5 percent on expectations that it will receive a bid for its Hong Kong unit from Internet investment firm Pacific Century CyberWorks. Colt Telecom (CTM) jumped 10.2 percent.
Leisure and lodging group Hilton (HLT) surged 17.2 percent, boosted by its announcement Thursday that it may split its betting and hotels businesses, alongside a drop in 1999 earnings that matched analysts' expectations. Right behind Hilton on the top European blue-chip gainers list, gas pipeline operator Centrica (CTA) rallied 15.5 percent after outlining plans Thursday to start a fixed-line and cellular telecom service later this year.
Drug maker AstraZeneca (AZN) rose about 10 percent, reversing a decline posted in the previous session after it reported a 3 percent fall in 1999 operating earnings on Thursday.
Among technology shares, chip designer ARM Holdings (ARM) ended 13.5 percent higher as investors snapped up shares unloaded Thursday by Apple Computer (AAPL: Research, Estimates), which cut its stake in the company to 4.7 percent.
Oil majors gush
A rise in oil prices sent Shell Transport & Trading up 4.3 percent while oil and gas rival BP Amoco (BPA) gained 3.8 percent.
Lagging in the minus column, Reed International (REED), co-owner of Anglo-Dutch business information publisher Reed Elsevier, was the FTSE 100's weakest performer, falling almost 8 percent after it posted an 8 percent decline in 1999 pre-tax earnings Thursday. Computer services provider Logica (LOG) fell 3 percent after gains in the previous session. United News & Media (UNWS) fell 4.3 percent after posting a larger-than-expected loss for 1999 and announcing heavy Internet investment plans. The company also said it probably will float some of the Web businesses it now is developing.
Technology stocks performed well in Frankfurt against the backdrop of a computer trade fair in Hanover, Germany, with auto stocks also showing strong gains. Electronic technology and power equipment firm Siemens (FSIE) rose 4.7 percent after an upbeat trading forecast for this year, released Thursday, while business software provider SAP [FSE:FSAP3] shot up 3.8 percent.
Anglo-American carmaker DaimlerChrysler (FDCX) gained 6 percent ahead of its 1999 earnings, slated to be published Monday. Volkswagen (FVOW), Europe's biggest automaker, closed more than 5 percent ahead after CEO Ferdinand Piëch gave a rosy assessment of trading conditions this year in an interview with a German newspaper.
Energy utility merger partners Viag (FVIA) and Veba (FVEB) fell 4.5 percent and 4.8 percent, respectively, after being forced to close one of their German nuclear power generating plants. Utility RWE (FRWE) dropped nearly 2 percent.
In Paris, Carrefour (PCA) shined brightest led the blue chips with a 9.4 percent advance, lifted by its announcement Thursday of strong 1999 earnings and plans to start an Internet shopping portal. Pay-TV broadcaster Canal Plus (PAN) leapt 6.4 percent. Among the index heavyweights, oil and gas operator TotalFina (PFP) finished 3.6 percent higher while France Telecom (PFTE) gained 1.5 percent.
Telecom equipment maker Alcatel (PCGE) rose 4.4 percent, helped by a new joint venture with Thomson Multimedia to develop Internet-enabled cellular phones. Chip maker STMicroelectronics PAR:PSTM] rose 5.3 percent, while water service and telecom company Vivendi (PEX) climbed 2 percent after outlining plans to list its utility arm in New York next year.
Weighing on the index was 'old' economy stock Alstom (PALS). The power engineering firm slid more than 8 percent as investors shifted cash out of the company into computer-related and media shares.
In Switzerland, financial heavyweights CS Group and UBS lost 2.3 percent and 2 percent, respectively. Nestlé, the world's largest food company, ended 1.5 percent ahead after posting a better-than-expected 12.6 percent increase in net profit for 1999. 
-- from staff and wire reports
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