European shares bounced off near six-year lows yesterday, helped by a strong performance from insurance and technology stocks and vague hopes that war in the Middle East could yet be averted.
European markets rebounded early in the day in the wake of Wall Street gains the day before, and stayed strong as US Federal Reserve chairman Alan Greenspan said the US economy was growing slowly but would probably gather pace later in the year.
"We went wild because Greenspan said once the war in Iraq was over, the economic environmentwould improve, it's as simple as that," said a Paris dealer at a large German bank.
But US markets responded more soberly to Mr Greenspan's testimony, which included comments that the uncertainties created by possible war with Iraq posed "formidable barriers" to business spending and clouded the economic outlook.
The Dow Jones index of blue chip shares closed down 77 points at 7,843.11 while the dollar reversed the day's gains to close unchanged in Europe at $1.075 to the euro.
"It is all Iraq, all the time," said Mr Mike Driscoll, a trader at Bear Stearns. "Until there is a resolution over what is going to happen in Iraq and that it's going to go according to our script, the market is walking on pins and needles."
In Europe, investors bought volatile technology and insurance stocks after earnings from Swiss reinsurer Converium and Philips beat expectations.
But trading volume was below average as traders braced for Friday's key address by weapons inspectors to the UN Security Council.
"There are no clear trends in the market. People are staying pretty close to their benchmarks," said Mr Des Flood, a European fund manager at Hibernian Investment Managers.
The FTSE Eurotop 300 index of pan-European blue chips was up 2.4 per cent at 788 points while the euro zone DJ Euro Stoxx 50 index rose 3 per cent to 2,190. In Dublin, the ISEQ gained more than 1 per cent, helped by the improved mood in Europe and good performances from CRH, Ryanair and the two main banking stocks.
In London, where the FTSE 100 added 2.5 per cent, oil heavyweight BP was the main focus of attention on the back of top-of-the-range fourth-quarter results, news of a share buy-back programme of up to €1.86 billion and Russian expansion news.
