LONDON (CNNfn) - European stocks ended sharply higher Thursday as investors shifted mountains of cash out of recently fashionable technology, media and telecom stocks and into "old economy" mainstays in sectors ranging from beverages to banks. London and Frankfurt rallied around 2 percent, Paris added 1 percent, and Zurich bounded up 4 percent, echoing a similar pattern on Wall Street.
The massive rotation continued a trend begun earlier this week as investors began to question high-tech valuations and seek ways to redress perceived imbalances in their portfolios. Benign inflation data in the United States, where the core Producer Price Index rose at a moderate 0. 3 percent rate in February despite continued signs of strong growth in the U.S. economy, sparked an early rally on Wall Street's leading Dow Jones index that underpinned the European advances.
Markets shrugged off a widely expected decision by the European Central Bank to raise interest rates by a quarter percentage point, to 3.5 percent.
The benchmark FTSE 100 in London closed up 110.2 points, or 1.7 percent, at 6,557.2, led by sharp gains in bank stocks and economically sensitive mining companies. The blue-chip CAC 40 in Paris jumped 1.1 percent to end at 6,258.53, well off its intraday high, while the electronically traded Xetra Dax in Frankfurt advanced 2.3 percent to 7,583.96, according to preliminary data. The SMI in Zurich raced up 4 percent to 7,131.5, a gain of 275.2 points.
Among smaller markets, the Aex exchange in Amsterdam added 3 percent, while the Mib-30 in Milan rose 1.5 percent. In Madrid, the blue-chip Ibex-35 gauge, the lone contrarian, ended fractionally lower at 12,258.9.
"You've seen a big rotation over the last two or three days out of the 'new economy' toward the old, and it really continues the scene that we saw yesterday with the Nasdaq falling and the Dow rising quite sharply," said Peter Oppenheimer, equity strategist at HSBC Securities in London.
"I think for a while now people have been scared to be out of TMT [the commonly used acronym for technology-media-telecom stocks, which have tended to rise in tandem recently] and the feeling has really been you have to be there...but now we're getting a dose of reality."
Reflecting the sectoral shifts, the pan-European FTSE Eurotop 300, a broader index of the region's larger stocks, climbed 1.6 percent to 1,600,73. The gain was spearheaded by rises of more than 9 percent in the index's mining and steel segments, both "cyclical" sectors whose stocks tend to toe economic trends closely, and advances of between 7 and 8 percent in the packaging, aerospace and defense, engineering, food and beverage components. On the downside, the computer sub-index fell 5.9 percent, information technology shares slid 5 percent, and media stocks gave up 4.5 percent.
In currency markets, the euro was trading at around $0.9687 late Thursday, little changed from its level before the ECB made its rate move.
London led by miners and banks
In London, it was bulwarks of the old economy - banks, engineers, construction firms, beverage companies and miners - that drove Thursday's gains. Mining group Billiton (BLT) soared 18.3 percent, while building materials firm Hanson (HNS) vaulted 18.7 percent, beverage producer Allied Domecq (ALLD) leapt 9.7 percent, and engineering firm Invensys (ISYS) shot up 14 percent.
Among financial-service stocks, Lloyds TSB (LLOY), Britain's largest retail bank, soared 13.3 percent, HSBC Holdings (HSBA) added 4.3 percent, Barclays (BARC) galloped up just under 8 percent, Abbey National (ANL) surged 11.1 percent, and mortgage lender Halifax (HFX) gained 7.4 percent.
Oil producer BP Amoco (BP-A) advanced 2.4 percent as it edged closer to getting a green light from U.S. regulators for its $27 billion takeover of U.S.-based Atlantic Richfield (ARC: Research, Estimates).
Drug issues ended mixed after a strong performance through most of the session. Glaxo Wellcome (GLXO) fell almost 1 percent, wiping out strong earlier gains, SmithKline Beecham (SB) ended just fractionally higher after climbing around 5 percent during the session, and AstraZeneca (AZN) closed up 4.2 percent.
High-tech companies peppered the minus column. Computer services provider Sema (SEM) slid 3.3 percent, while business software developer Misys (MSY) dropped 6.5 percent and software rival Sage (SGE) gave up 5.7 percent. Index heavyweight Vodafone AirTouch, which accounts for about 14 percent of the total FTSE 100 valuation, lost 1.6 percent, while pay-TV broadcaster BSkyB (BSY), 40-percent owned by Rupert Murdoch's News Corp., fell 6.1 percent.
Lastminute.com (LMC), a Web-based provider of short-notice discounts on travel, gifts and entertainment, dropped about 5 percent, falling back to its flotation price at 380 pence by Thursday's close. The stock rose as high as 55 pence on its public debut in London Wednesday.
In Paris, banking stocks soared amid a new bid by Dutch banking company ING for CCF (PCCF). ING said it is relaunching until the end of May a failed December offer. CCF surged 11.2 to 124 euros, leading the CAC 40 advancers, as traders gave the thumbs up to ING's 137.5 euro-per-share bid.
Catering firm Sodexho Alliance (PSW) sprinted ahead 8.4 percent, while car-parts maker Valeo (PFR) jumped 5.6 percent.
Carmaker Renault (PRNO), a bulwark of traditional French industry, rose 6.3 percent, while Aventis (PAVE), the world's biggest drug maker, leapt 9.2 percent. Food processor Danone ended up 8.5 percent amid reports that Spanish brewer Mahou is preparing a bid to buy Spain's San Miguel brewery from the French company.
BMW motors ahead
In Frankfurt, luxury carmaker BMW (BMW) closed 2.25 percent higher, at 31.75 euros in Frankfurt, following Wednesday's gain of 14 percent. The company said it agreed to transfer most of its money-losing Rover division to U.K. private equity firm Alchemy Partners. BMW said it will take a charge of 3.15 billion euros ($3 billion) to exit the business, pushing its earnings for 1999 into a loss of 2.487 billion euros.
Power utility RWE (FRWE) advanced 5.7 percent, retailer Metro (FMET) added 5 percent, and sports apparel maker Adidas Salomon (FADS) galloped up 13.7 percent.
In Zurich, diversified industrial group Alusuisse spearheaded the blue chip advance with a 13.2 percent leap, followed in the gainers' column by Zurich Allied, with an 11.5 percent rise. 
-- from staff and wire reports
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