Insurers led European bourses sharply higher yesterday as a steadier nerve returned to stocks, helped by some better-than-expected corporate news from Adecco, Philips and ING.
By 1541 GMT, with only Frankfurt still officially trading, the FTSE Eurotop 300 index was up 1.7 per cent at 822 points, with advancing issues outpacing decliners by five to one in good volume.
The benchmark, up for the third session in a row, edged to near four-month highs during the session, and is 20 per cent above its six-year closing low of mid-March.
Investors are relieved to put the uncertainty of the Iraq war behind them as conflict there ends, and turn their gaze back to the economy and corporate earnings.
"Slowly but surely, the worm is turning towards stronger stocks and weaker bonds," said David Brown, Chief European economist at Bear Stearns.
"The three-year downtrend in US stocks and the two-and-a-half year downtrend in European stocks seems to be over, although we are certainly not anticipating a dramatic reversal on the stock-bond rollercoaster," he added.
Among the day's standouts, Adecco trounced forecasts yesterday, saying first quarter net profit fell far less than feared as the world's largest employment fimr slashed costs and cut 1,500 staff, boosting its shares by 15.2 per cent to 48.40 Swiss francs.
Philips Electronics rose 3.9 per cent to 16.77 euros after reporting better than expected first quarter profit at most of its operations, despite lower sales that sharply lagged forecasts.
Dutch financial services group ING Groep rose 4.8 per cent to 14.59 euros after reporting that losses at its equity investments had been sharply reduced over the past few weeks as markets recovered.
The group said, however, it was unable to make any forecast for 2003, a reminder of the many clouds still darkening the investor's horizon.
Insurers were bolstered by three-straight days of market gains, with the sector up nine per cent since Thursday. Rising markets swell the value of the shares they own in portfolios, taking pressure off the solvency levels they must observe.
Among the insurers leading the way, Dutch Aegon rose 8.9 per cent to 9.05 euros, while Germany's Munich Re gained 8.35 per cent to 79.70 euros, and Britain's Aviva rose 7.9 perent to 408.5 pence.
Among national benchmarks, the French CAC-40 gained 1.6 per cent to 2,921.52 points, the British FTSE 100 rose 1.75 per cent to 3,916.8 points, and the Swiss Market Index perked up 2.5 per cent to 4,605.3 points. The German Dax index added 2.8 per cent to 2,856 points.
On Wall Street, the Dow Jones industrial average was up 0.46 per cent at 8,387 points, while the tech-laden Nasdaq Composite rose 0.55 per cent to 1,392 points.
Europe's number-three drugmaker, Novartis of Switzerland, rose 2.5 per cent to 54.40 Swiss francs as investors breathed a sigh of relief the group was able to hold first-quarter net profit steady at $1.06 billion, despite a chunky charge for its share of a 2002 loss by affiliate Roche.
Carrefour, the world's second-biggest supermarket group, repeated its upbeat outlook for 2003 and said it would weigh piecemeal buys if parts of Dutch retailer Ahold were sold. Carrefour shares rose 3.5 per cent to 39 euros.
Shares in debt-laden Deutsche Telekom rose 2.4 per cent to 11.90 euros after news that it sold a five per cent stake in Russia's largest mobile operator, Mobile TeleSystems to raise about 200 million euros.
Shares in struggling British engineering firm Invensys soared 13.7 per cent to 14-1/2 pence after it unveiled plans to sell more than half its business and scrapped its final dividend after trading conditions took a turn for the worse.
In the technology sector, news that US computer titan IBM had posted late on Monday its first gain in quarterly earnings in almost two years, lent strength to the information technology sector, with French IT services company Cap Gemini gaining five per cent to 24.98 euros.
The Eurotop 300's rally to near four-month highs came to a screeching halt on reports that US industrial output had fallen 0.5 per cent in March, against a revised 0.1 per cent drop in February, and that capacity utilisation in the world's largest economy had nudged down to 74.8 per cent from 75.3 per cent a month ago.
Earlier in the afternoon a report that manufacturing conditions in New York State had deteriorated in April, from already depressed levels in March, also took some shine off the European rally.
"The latest data confirm that US industrial activity was in recession in the first quarter, but the fact that the uncertainty surrounding the Iraq conflict has been removed means a scenario of gradual recovery in the second and third quarters is not called into question so far," said CIC economist Chloe Magnier in Paris.
"However, if geopolitical factors were to take the upper hand again, with another potential source of tensions in Syria for instance, then I don't see how we could avoid a scenario of recession."
On Monday, senior US officials threatened sanctions over charges that Syria supported terrorism, was harbouring Iraqi leaders and was developing chemical weapons.
As the earnings season kicked into high gear, investors waited to see what blue chip companies on both sides of the Atlantic will have to say on how they see business for the coming months.
A plethora of forthcoming results from US technology powerhouses such as Microsoft Corp., Intel Corp, chipmaker Texas Instruments and mobile phone maker Motorola are seen as crucial to determine whether or not the current rally has further way to go.