At 8:56 a.m., the DJ STOXX 50 was up 25.87 points or 0.83 percent to 3,142.45, while the DJ STOXX 600 added 2.44 points or 0.78 percent to 315.61.

Overnight, Wall Street closed mixed, with tech stocks under pressure as investors voiced their disappointment over earnings results and guidance from Nokia and ebay.

Technology stocks are expected to recover on Friday, following a solid set of results from Google after the bell last night. The shares gained 17 percent in after hours trading.

Losses on Merrill Lynch weighed on the wider market and the DJIA ended the session flat, up 1.20 points, or 0.01 percent, to 12,620.50. The S&P 500 was up 0.85 points, or 0.06 percent, to 1,365.56 and the Nasdaq was down 8.28 points, or 0.35 percent, to 2,341.83.

Oil prices fell slightly after setting yet another record high overnight.

Light, sweet crude for May delivery fell 7 cents from Wednesday's close to settle at $114.86 a barrel on the New York Mercantile Exchange, the contract's first lower close in a week.

In Europe, banks are in the spotlight ahead of first-quarter results from Citigroup, said Giuseppe Amato, market strategist at Lang & Schwarz.

"It's hard to say what will happen, but I would expect Citigroup to report write-downs at the higher end of the lot," Amato said.

Rumours had circulated in the market this week that further write-downs of up to $33 billion may be necessary, while Lehman Brothers analyst Jason Goldberg estimates the sum could approach $10 billion.

In Spain, Bankinter SA outperformed the IBEX, after it said first-quarter net profit came in at 73.65 million euros, down 13.5 percent, but ahead of analyst forecasts of around 70 million euros.

Net interest revenue was also at the top end of expectations, having risen 7.44 percent to 153.78 million euros. Analyst forecasts had ranged from 151 million euros to 153 million euros.

Speculation over a rights issue at Royal Bank of Scotland propelled the stock 3.28 percent higher after the Financial Times, citing people familiar with the matter, said the bank is stretched by its bid for ABN Amro and is expected to unveil its plan at its annual meeting next Wednesday.

Meanwhile, tech stocks notably recovered today, up 1.26 percent according to the DJ STOXX 600 for the industry, following a 6 percent decline yesterday.

Solid earnings and guidance from Google overnight lifted the mood in the sector, and ASML gained 1.73 percent, while CapGemini was up 1.34 percent and Dassault Systemes added 1 percent.

Elsewhere, Yara International rallied 8 percent after it beat forecasts with its first-quarter results.

In an initial reaction to the numbers, Carnegie analyst Henrik Sinding said the results were "very strong indeed", beating his own forecasts by more than 50 percent.

Fertiliser prices have jumped more than 40 percent in the year to date, and Yara said an imminent tax of 135 percent on all exports from China will "substantially impact" the global demand and supply balance.

Staying with earnings, Bic shed 4.7 percent, after disappointing investors with a sharper-than-expected fall in first quarter sales and profits.

The consumer goods group was hit by a slowdown in the United States and investments in its brand.

Societe Generale analysts slashed their 2008 and 2009 earnings per share estimates by some 25 percent in light of Thursday night's figures, to reflect "the extent and abruptness" of the decline in Q1 2008 figures.

In M&A-related stories today, Fresenius Medical Care gained ground in early deals, up 2.37 percent, on the back of rumours that U.S. peer Baxter International is mulling a bid for the dialysis specialist.

The group declined any comment on the rumours last night.

Meanwhile, Rio Tinto underperformed its sector, up 0.16 percent, weighed down by a report in the Sydney Morning Herald which said BHP Billiton will not raise its bid for its peer.

And France Telecom shed another 1.81 percent as the group confirmed its "interest" in TeliaSonera but said that there are "no negotiations at this stage."

The news sparked another downgrade at Dresdner Kleinwort to 'sell' from 'hold'.

The broker said today's conference call confirmed largely that the group's management is committed to a takeover to gain scale.

"We think FT already has plenty of scale and remain sceptical of its ability to generate meaningful synergies," the broker said.

Also in broker action, RWE was added to Merrill Lynch's 'Least Preferred' list of utility issues and the stock fell 3.48 percent. The broker said it sees limited earnings growth potential in the years ahead.

patrizia.kokot@thomsonreuters.com pk/slj/pk/wj/pk/rfw

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Merrill Lynch's first-quarter net loss to common shareholders was $2.14 billion, compared with a profit of $2.11 billion, in the same quarter last year.

As part of that cost cutting, Merrill said it was cutting head count by 4,000 from year-end 2007 levels; about 1,100 of the reductions took place in the first quarter. Job cuts will focus on the global markets and investment banking business and support areas, and will not affect retail brokers.

At the end of the first quarter, the company had 63,100 employees. Merrill Lynch expects a second-quarter restructuring charge of about $350 million linked to the job cuts. The reduced headcount is expected to generate about $800 million of cost savings a year.

Merrill Lynch reported losses, write-downs and reserve increases of $1.5 billion on collateralized debt obligations, $925 million on loans financing leveraged buyouts, $3.5 billion on an investment portfolio, more than $800 million on residential mortgages, and $3 billion for exposure to bond insurers.

Merrill Lynch shares closed up 4.1 percent at $46.71 on Thursday.

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"The key index started higher, but it traded weaker in early trading as foreign investors became net sellers of stocks in one session," said Kim Young-gak, an analyst at Hyundai Securities Co.

Tech blue chips traded in positive territory on hopes for stronger earnings. Market leader Samsung Electronics rose 1.21 percent and consumer electronics giant LG Electronics advanced 2.21 percent on its robust first-quarter earnings.

No. 6 non-life insurer First Fire & Marine Insurance rose by the daily limit of 15 percent for the third session after Meritz Fire & Marine Insurance said it plans to send a takeover offer to the insurer.

But financial shares lost ground, affected by credit crunch woes stemming from losses by Merrill Lynch & Co. and profit-taking. Top lender Kookmin Bank fell 2.84 percent and No. 2 financial services firms Shinhan Financial Group declined 2.5 percent.

U.S. markets closed mixed Thursday after Merrill Lynch reported a first-quarter loss of US$2.14 billion, exceeding analysts's estimates. The Dow Jones industrial average rose 0.01 percent and the tech-heavy Nasdaq composite index shed 0.35 percent.

After opening at 1,000 won, the local currency was trading at 999.5 won against the U.S. dollar as of 11:20 a.m., down 7.5 won from Thursday's close.

But an interesting study distributed by Alphen Asset Management takes a contrary view. The article (not endorsed by Alphen) was written by semi retired Barnard Jacobs Mellet investment strategist Piet van Schaik.

First, Van Schaik notes that the decline began in mid-January, some time after Polokwane ended on December 20. In fact, the rand strengthened a little early in the year. "Foreign investors were clearly not as concerned about the new president-in-waiting as South Africans were," he notes.

The rand started falling when foreigners turned heavy sellers of local equities. Between January 16 and 31, they sold a net R13,5bn of equities, R7,4bn of it on just two days -- January 25 and 28, he notes.

The Eskom crisis was unfolding at this point, but so was the subprime crisis. Merrill Lynch and Citi announced $10bn-plus losses, and the Fed was warning of a downturn in the US. On January 22, the Fed reduced rates by 75 basis points -- the largest one-day cut ever.

Foreigners may have been extracting their investments not because of what was happening in SA, but to cover losses elsewhere. If this is so, they could be back sooner than expected, which would lead to a more stable (and possibly stronger) rand. I mported inflation could fall significantly. The implications for interest rates are obvious, Van Schaik notes.

Merrill Lynch's losses came after the world's largest brokerage wrote down the value of assets tied to mortgages and leveraged loans by several billion dollars. The company also said it would eliminate 3,000 more jobs, for a total of 4,000 in the latest round of cuts.

"The market is facing some selling pressure after a three-day run-up," Westcomb said in a note to clients.

At 10.20 a.m. (0220 GMT), the benchmark Straits Times Index was down 15.21 points or 0.5 percent at 3,111.09.

Decliners outnumbered gainers 215 to 126 with 1,242 stocks unchanged.

There were 306.3 million shares traded valued at S$277.4 million.

Banking shares were mostly lower, with DBS Group down 0.6 percent at S$19.06 and United Overseas Bank off 0.8 percent at S$20.30.

Among blue chips, Singapore Telecom fell 1 percent to S$3.85 and Singapore Exchange was down 2.7 percent at S$7.89. Singapore Airlines gained 0.1 percent at S$15.36 and Singapore Technologies Engineering was up 0.9 percent at S$3.41.

Property stocks were mixed, with CapitaLand gaining 0.6 percent to S$6.67 and City Developments down 1.2 percent at S$11.70.

($1 = S$1.35)

jonathan.burgos@thomson.com

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Merrill Lynch reported a first-quarter loss of $2.14 billion after writing down the value of subprime-related assets, but Chief Executive John Thain said that business conditions in April appear better than in the first quarter. The Philadelphia Federal Reserve announced its index of regional manufacturing activity stood at negative 24.9 in April, down from negative 17.4 in March. Shipping companies were firmer, with Nippon Yusen up 1.5 percent at 976 yen, Mitsui OSK Lines up 2.2 percent at 1,321 and Kawasaki Kisen Kaisha up 5.4 percent at 1,052. Auto issues gained after the open and ended the session higher, with Toyota Motor up 1.6 percent at 5,090 yen, Nissan Motor up 1.6 percent at 881 yen and Honda Motor up 1 percent at 3,050 yen. Video game maker Nintendo advanced 3.2 percent to 54,300 and major steel manufacturer JFE Holdings rallied 3.5 percent. Aeon Co rose 1 percent to 1,264 yen on a report that the supermarket chain operator plans to close around 100 stores operated by its U.S. subsidiary in a bid to revive earnings. Seiko Epson gained 0.5 percent at 2,770 yen on a report that the company is likely to post a group operating profit of some 61 billion yen for the year ended March 31, a 21 percent rise from the previous fiscal year on a strong performance by its mainstay inkjet printers in Japan and abroad. Banks were weaker as investors cashed in profits from recent gains Mizuho Financial was 1.9 percent lower at 459,000 yen, Sumitomo Mitsui Financial down 1.3 percent at 738,000 yen and Mitsubishi UFJ Financial down 0.4 percent at 1,000 yen. ($1 = 102.49 yen) masami.hachisu@thomson.com

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