Frankfurt, Paris, Milan, Amsterdam and Zurich climbed to intra-day highs, encouraged by a strong dollar and an overnight turnaround in Wall Street stocks. Currency markets saw the dollar pause for breath in a relentless climb which has been fuelled by the strength of the US economy and Japanese economic gloom.

London's uninspired performance contrasted with the cracking pace set in the rest of Europe. After achieving a record close on Wednesday, London stocks flitted in and out of profit. Dealers said a 3 per cent overnight fall in Tokyo shares rattled nerves and stalled the recent buying momentum. Some investors opted to pocket profits from the recent gains. "We shot up smartly this morning, but came scurrying back down. People are exercising a bit more caution," said a trader as the blue-chip FTSE index registered a marginal gain.

OtherEuropean bourses advanced strongly, boosted by Wall Street which reversed a negative start on Wednesday to finish at a record after reports indicated the US economy was shaking off any effects of the Asian financial crisis. The Dow Jones industrial average ended up 68.51 points at 8,868.32, building on a gain of more than 11 per cent so far this year.

An economic survey showed industry powered forward last month, with little apparent drag from weakened Asian economies and prices well under control.Frankfurt shares were up nearly one percent late in the morning session. The Xetra DAX index, which tracks all-day computerised trade, climbed to 5181.38 points, bettering the previous trading high set yesterday. The market was driven by a strong dollar, which makes German exports cheaper and lent strength to export stocks such as car-makers and chemicals groups. The strong dollar also encouraged buying sentiment in Paris, where stocks climbed over 1.5 per cent by midday.

The CAC blue-chip index was at 3945.73points, eclipsing the previous intra-day high of 3911.59 hit on Wednesday.

In currencies the dollar weakened slightly after hitting a high of 134 yen as the Bank of Japan's diffusion index for major manufacturers painted a depressing picture of the Japanese economy. "The dollar is on a major uptrend and has been for some time," said Joe Prendergast, head of global currency strategy and research at Credit Suisse First Boston. "We have been triggered out of recent ranges because of a slight firming in US interest rate expectations following reasonably strong economic data," he added.

Good news for the US currency has driven the dollar to more than seven-month highs against the mark and 11-week peaks on the yen. The dollar rode on the back of a strong US National Association of Purchasing Management (NAPM) survey for March and a gain in the February leading indicators index, both released on Wednesday. The data encouraged hopes of an early rise in US interest rates after the Federal Reserve's policy-settingcommittee left rates unchanged, analysts said.