Despite accounting worries from the US, stocks regained some ground, writes Jane O'Sullivan.
Stock markets shrugged off the latest accounting worries to emerge in the United States, clinging instead to hopes of an economic recovery as they regained ground yesterday.
News that office equipment company Xerox expected to restate revenues by about $2 billion (€2.03 billion) over a five-year period jangled nerves still raw from WorldCom's disclosure earlier this week.
But it failed to prevent markets being lifted by end-of-quarter buying and optimism about the US economy.
"Xerox is just another I-told-you-so for those who feel that corporate America has to clean up its act," said Mr James Volk, co-director of institutional trading at DA Davidson in New York.
"There's enough out there already on the disappointment with the way that corporations have been reporting earnings to put a lid on things."
Instead, markets latched onto hopes that the US economy was on the mend after a stronger-than-expected consumer sentiment report followed hot on the heels of Thursday's upbeat growth data.
The University of Michigan's closely watched consumer sentiment index surpassed economists' expectations, even though it suffered its biggest one-month drop in June since the September 11th attacks.
Analysts also attributed yesterday's stock market gains to fund managers shuffling their portfolios ahead of the quarter's end to dress them up for shareholders.
On Wall Street, shares closed 0.29 per cent down at 9,245.26.
In the meantime, the Nasdaq composite regained ground to end up 0.4 per cent higher at 1,464.99.
But there was little confidence that yesterday's gains were the start of a sustained recovery.
"We've had a modest pick-up in economic data but it's not going to be enough to see a big recovery in corporate earnings," said one British fund manager.
"That's what is needed to ultimately drive the market higher and the fear is that's just not going to happen in the second half of the year and we could be in a low-growth environment for some time."
In Dublin, the Irish stock market gained more than 1.3 per cent but dealers attributed this mainly to end-of-month buying.
"I'm not sure we can hold onto these gains next week, either in Ireland or in Europe," said a dealer.
Most of the leading stocks that have suffered in recent days recouped some lost ground, with AIB regaining nearly 3 per cent, CRH up more than 3 per cent and Ryanair adding more than 6 per cent.
Elan proved a notable exception, shedding nearly 8 per cent on news that a rival US drugmaker had received approval for a generic version of Elan's key drug, Zanaflex.
In London, shares surged by 2.5 per cent to their best level for more than a week, boosted by a jump in insurance stocks after rules were relaxed on the value of their invested assets.
Britain's financial regulator said it would allow insurers to take into account past falls in share prices when calculating whether they have sufficient capital to withstand a 25 per cent fall in share markets.
- (Additional reporting by Reuters)
