European stocks continued to build on their pre-Christmas gains despite the very thin volume of trade and the caution by investors ahead of the launch of the euro.

Frankfurt

Germany's blue-chip Xetra DAX index on Monday rose above the symbolic 5,000 points for the first time this month despite the low trading volume before the euro currency's January 1 launch.

Dealers said enough investors were making traditional end-of-the-year purchases for the DAX to extend its gains. The electronically traded Xetra DAX closed up 61.53 points, or 1.24%, at 5,040.15 points while the floor DAX climbed 1.88%to 5,044.77.

But dealers said low turnover exaggerated rises by some stocks such as Commerzbank which jumped 4.5% to DM 52.10. "There's so little (share trading) business going on that there are some accidental prices," said Frank Langer, a trader at Citibank in Frankfurt.

DaimlerChrysler shares surged 5.7% to DM 166.50, lifted by the firm's announcement that sales rose about 13% this year and profits were also significantly up.

Elsewhere in the car manufacturing industry, BMW rose 4.7% to DM1,314.50 and Volkswagen 1.7% to 137.30 as the dollar stayed strong.

Telecom shares sagged as Germany's price war in that sector heated up. Deutsche Telekom fell 1.6% to DM 55.02 after its chief executive said that his firm plans cuts in long-distance charges next year in addition to its reductions of up to 63% which take effect in January.

Meanwhile Mobilcom dropped 6.3% to DM562 marks after announcing on Monday it plans to launch a local-call and Internet offensive next year and to offer a free one minute during evening long-distance calls.

Traders said that with most business on hold while clients wait for the switch to the new euro currency at the end of the year, some window dressing was pushing the index higher in thin trade.

"We are going to see a lull in activity for the next three days, with people waiting for the end of the year and the switch to the euro before they start to trade again in earnest," said one senior salesman.

Paris

French stocks barely edged up in the thinnest session in almost a year, held back by reluctance to take positions ahead of next week's euro launch, dealers said.

The CAC-40 index closed up 0.68 points to close at at 3,873.10 while trading volume stood at Ffr 4.5bn. "We've seen very little activity today, there are very few people around and nobody wants to make any big moves," said one Paris dealer. "A lot of people are still on holiday and others are testing their systems for the euro next week."

The lack of liquidity meant that individual orders created sharp price movements, "but the truth is there's nothing going on and no real news. Nobody is really watching Wall Street too closely, or the dollar, or any of the usual indicators. We're just biding our time until next week."

L'Oreal closed up 73, or 1.9% at 3,908 while France Telecom fell 4 to 432 and Alcatel was down 17, or 2.4% at 679.