McDonald's Corp. , the world's largest restaurant chain, said Friday it is seeing improving sales trends in Europe and the United States and reiterated expectations for earnings gains in 2002.

European sales in the first two months of the fourth quarter were up 8 percent, excluding the impact of foreign exchange, and U.S. sales rose 2 percent, the company said.

McDonald's also restated its expectations for 2002 earnings of $1.47 to $1.54, in constant currencies, reflecting its previous forecast of 5 percent to 10 percent growth and including a 2-cent benefit from an accounting change.

McDonald's shares rose $1.10, or 4.3 percent, to $26.83 in Friday morning trading on the New York Stock Exchange.

The company said its European business was recovering from food safety concerns that were sparked when mad cow disease, a fatal brain-wasting disorder, was found in cattle late last year. The discovery of mad cow in Japan, where three cows have tested positive since September, has led to similar consumer concerns there.

The company is trying to combat the mad cow concern by advertising that it does not use Japanese beef. Constant currency sales in the Asia/Pacific region declined 4 percent for the first two months of the quarter.

The company said it expected fourth-quarter earnings to be a penny below consensus analyst estimates, weighed down by weak Asia/Pacific economies and the Japanese mad cow concerns. But some analysts said investors may have been relieved that the fourth quarter outlook was not worse.

"It's a relief rally," John Glass, restaurant analyst at Deutsche Banc Alex. Brown, said of the stock move.

The company said it expected fourth-quarter earnings of 34 cents before one-time items. Analysts expected earnings of 34 to 36 cents in the quarter with a consensus of 35 cents, compared to 34 cents earned a year ago, according to market research firm Thomson Financial/First Call.

Including pretax charges of $235 million to $245 million, fourth-quarter earnings per share are expected to be 21 to 22 cents.

Charges include $35 million to $40 million for the disposition of Aroma Cafe in Britain and unrecoverable costs incurred through fraud in connection with a Monopoly game promotion and the related termination of a supplier.

Industry sources said in August that McDonald's had put Aroma Cafe, the British coffee-shop chain, up for sale.

In the Monopoly fraud, 33 people have been indicted over an alleged scheme to bilk the company out of millions of dollars by fixing several of the chain's promotional games.

McDonald's is also taking a previously announced $200 million pretax charge related to employee severance and outplacement and other restructuring activities.