European stock markets rebounded from early weakness and regained most of the morning losses once it became clear that Wall Street was not going to react negatively to the bombings in Afghanistan.
In London, the FTSE-100 index was virtually unchanged, with gains by telecom stocks countering weakness in banking and airline stocks. Insurance stocks, however, came under heavy selling pressure after Zurich doubled its loss estimates for the September 11th attacks. Zurich shares fell more than 5 per cent while other insurers such as AXA, Allianz and Munich Re were all down more than 2 per cent.
The Irish market was down almost 2 per cent, but this was mainly due to a modest fall by Elan, which accounts for almost a quarter of the ISEQ Index. In line with weakness in the airline sector, Ryanair was also weaker. Overall, however, trading in Irish stocks was very light and the only volume of any significance was in Ryanair, where almost 2.7 million shares traded.
Financial shares in London were generally weaker, but losses in the sector were balanced out by gains in technology stocks. The charge by the technology stocks was led by Ericsson, which was up 5 per cent, while Nokia was 2 per cent higher. The weakness in financial shares was down to the general uncertainty, but in the case of some of the large British banks it was partly due to their exposure to Railtrack, which went into High Court administration with debts of £3.3 billion sterling (€5.5 billion).
Analysts said that the markets shrugged off concerns about the start of military action. "The news would be if they stirred up a major hornets' nest of political controversy or if there was an unacceptable amount of damage," said Mr Andrew Bell, European equity strategist at Carr Sheppards Crosthwaite. He said the focus was on the economic background and the corporate earnings outlook: "If people felt the earnings picture for the economy was recovering, they wouldn't regard the current military tension as a reason to sell the market."
Lehman Brothers equity strategist Mr Ian Scott said: "On a six-month view we would expect to see equities higher than today and to perform better than bonds."
