European stocks soared for the second straight day today led by volatile insurers as US futures firmed.
Many investors see hostilities starting soon in Iraq, lifting some of the uncertainty that has plagued markets.
"War would appear to be moving closer . . . we believe a substantial bear market rally could occur," said strategists at Commerzbank Securities, who said any rally would be lead by financials and cyclical sectors.
The rally was broad-based - with insurers, technology, cyclicals, telecoms, media and banking sectors all rising more than 3 per cent.
This two-day bounce should be viewed within the context of the longest bear market since before World War Two, strategists noted. About €5.3 trillion has been wiped off the value of Europe's 600 biggest listed companies since shares peaked in March 2000, according to Bank of America.
Mr Robert Kerr, European equity strategist at Bank of America Securities, said: "Recent data shows consumers and companies have been holding off spending because of the prospect of war. If the war is short then spending may pick up again, boosting markets".
Markets have been on a roller-coaster ride this week. On Thursday the FTSE Eurotop 300 ended up 6.08 per cent - its biggest ever one-day percentage gain. It fell 3.4 per cent on Wednesday to close at its weakest level since mid-December 1996.
In New York, the Dow Jones industrial average closed up 3.6 per cent and the tech-laden Nasdaq Composite ended 4.8 per cent higher.