Royal Philips Electronics NV, the world's largest maker of light bulbs and electric shavers, and drug manufacturer Roche advanced after they posted quarterly pro"ts that topped estimates. Electrolux and Logitech also climbed on betterthan-expected results.

"The earnings season has been very good, " said Christian Schneider, at Deutscher Investment Trust in Frankfurt, which oversees about $20bn in equity funds. "We still see upside potential for stocks."

BP paced a drop among energy companies after oil fell from last week's record high. Online gambling shares plummeted after the US indicted BetonSports and its chief executive, David Carruthers, for alleged racketeering and fraud.

The Dow Jones Stoxx 600 Index rose 0.9% to 314.56 in the "ve days to Friday, the most since the week ending 30 June. The Stoxx 50 advanced 1.2%, and the Euro Stoxx 50 for the 12 nations in the eurozone climbed 1.4%. Benchmarks gained in 13 of the 18 western European markets. The DAX rose 0.5%, the CAC 0.8% and the FTSE 0.2%.

The Stoxx 600 advanced 2.3% on 19 July, its biggest jump in a month, after Ben Bernanke, chairman of the US Federal Reserve, told Congress that the American economy was moderating, easing concerns of continued interest rate hikes. The measure has tumbled 8.5% from a "ve-year high on 9 May.

The Fed has raised rates 17 straight times since June 2004.

"Investors have discounted fears" about rates, said Lars Kalbreier, the Zurich-based global head of equities at Credit Suisse Group, which manages the equivalent of $592bn.

"We think markets have overreacted and we believe in a positive outcome for stocks in the next 6 to 12 months."

Of the six Stoxx 50 members to have reported second-quarter earnings, three have exceeded analysts' estimates, or 50%. Royal Dutch Shell, AstraZeneca and Santander Central Hispano are among 13 members of the Stoxx 50 to report results this week.

Analysts expect pro"ts for Stoxx 600 members to increase 11.9% on average this year, higher than the 11.1% predicted two weeks ago, according to estimates compiled by FactSet Research Systems in London. That's still down from 24% growth projected for 2005.

"US earnings have, on average, beaten expectations and we think Europe will do even better, " said Rolf Elgeti, head of European equity strategy at ABN Amro in London and top-ranked for pan-European strategy in Thomson Extel's 2004 and 2005 surveys. "In Europe consensus estimates are lower."

BP, Europe's biggest oil company, fell 3.7% in the week to 619.5p, the most in two months. Oil has now declined almost 4% since reaching a record $78.40 a barrel on 14 July on speculation that war in Lebanon will not disrupt supplies from the Middle East, the source of almost a third of the world's oil.