Eurostocks head for biggest one-day gain in 5 years

European shares were set for their biggest one-day per centage gain in around five years in late trade yesterday, as investors cast aside their inhibitions after recent heavy selling and tracked a firmer Wall Street.

The rally was very broad-based, although battered insurers led the way higher, buoyed by Swiss Life, which soared on takeover talk.

"There's a feeling that maybe we're building a bottom," said David Thwaites, a European strategist at BNP Paribas.

By 1556 GMT, with only Frankfurt still trading officially, the FTSE Eurotop 300 index was up 5.75 per cent at 958 points, further distancing itself from last week's near-five year lows after bouncing on Friday.

The surge took the index past its mid-September intra-day low breached earlier this month and, if held to the close, would mark its biggest one-day percentage gain since October 21 1997, when the benchmark rallied 5.8 per cent amid the Asian crisis.

The large cap Euro Stoxx 50 did even better, jumping 6.9 per cent to 2,711 points, although chartists said the index needed to break above 2,906 to enter a positive trend.

"It looks good for the moment, but not good enough to call a bottom, or call this more than a technical-driven rebound," said Thomas Anthonj, a technical analyst at ABN AMRO in Amsterdam.

Strategists also said that although markets appeared to be putting their accounting worries behind them, the corporate newsflow was still not completely positive.

"The second quarter (results season) is pretty similar to the first quarter, but there's not much confidence about the outlook," said BNP Paribas' Thwaites, ahead of another heavy week of earnings.

Oil majors BP and Repsol, Italy's No. 2 bank Sanpaolo IMI, and Europe's biggest car maker Volkswagem are among the firms reporting today.

The advance was broadly-based, with insurers, autos, media, tech, financials banks, healthcare and chemicals six or more per cent higher.

The move by two of the world's biggest pension funds, Dutch PGGM and ABP, to stop lending securities to hedge funds to discourage them from short-selling stocks also helped sentiment, analysts said.

On Wall Street, the Dow Jones industrial average was 3.8 per cent ahead at 8,580 points, with the tech-studded Nasdaq Composite up 3.9 per cent as both indices extended Friday's advance.

Insurers dominated the blue chip leaderboard as the sector, bombed out on worries over its solvency in the face of sliding stocks, rode the market bounce.

Swiss Life stood out among the gainers, jumping 17 per cent on rumours the insurer could be a takeover target.

Germany's Allianz and Munich Re, and Switzerland's Zurich Financial, Swiss Re, and Baloise, rose between nine per cent and 16 per cent each.

Dutch duo ING and Aegon gained 11.6 per cent and 7.7 per cent respectively.

That still left the DJ Stoxx index of European insurers down some 40 per cent so far this year, but up 25 per cent from its intra-day low last week.

"If insurance companies are not going out of business, it's about time they started going up," said Thwaites.

Also up strongly were the region's automakers, led by Volkswagen after supervisory board sources told Reuters they did not expect it to warn on 2002 profits when the German group unveils its second-quarter numbers today.

That boosted its shares 8.34 per cent. Many analysts had expected Volkswagen to reduce its guidance for the full year amid widespread expectations that profits in the second quarter have suffered from weak global auto markets.

Also rallying strongly were compatriots BMW and DaimlerChrysler, up more than eight per cent each, and Fiat, which leapt 4.8 per cent, even though the struggling Italian group reported an operating loss of 127 million euros in the second quarter.

Meanwhile, the construction sector partly reversed Friday's sharp falls after France's Saint-Gobain warned on profits, helped by an 18 per cent rise in profits at UK rival Aggregate Industries.

That sent Aggregate Industries' shares up 11.4 per cent and lifted British building materials group Hanson eight per cent.

In addition to the next chapter of European company earnings, a heavy week of US data also kicks off today with the consumer confidence and culminating with Friday's July payrolls and personal consumption figures as investors look to see if economic recovery is flagging.