Steady earnings from a broad swathe of sectors lifted European shares yesterday, but an unsteady Wall Street and doubts over the recent upturn's lifespan slashed the advance despite signs of easing volatility.
Swedish telecom equipment maker Ericsson rocketed 19 per cent on speculation that institutional investors were calling in shares loaned out to short-sellers who were then forced to buy on the open market to cover their positions.
Global bank HSBC eased 1.7 per cent after saying it had agreed to buy Mexican bank Grupo Financiero Bital for $1.14 billion in cash.
Dutch financial group ING, which paid $200 million for its 19.2 per cent stake in Bital earlier this year, fell 1.5 per cent.
By 1530 GMT with only Frankfurt still officially trading, the FTSE Eurotop 300 index of pan-European blue chips was up 0.7 per cent at 983 points.
The advance was broadly based, but bourses failed to hold their highs of the day as investors doubted whether the market's sharp bounce back in recent sessions was a fundamental change of direction for the two-and-a-half year old bear market.
"Volatility has come down from its peaks which means there is consensus about the fact that the market should go up, or there is complacency," said Robert Kerr, European strategist at Bank of America.
Earlier, the Eurotop 300 was up nearly 2.5 per cent and in sight of six-week highs after rallying about 15 per cent since its five-year low on July 24.
The narrower DJ Euro Stoxx 50 index added 0.9 per cent. "I can't see the market just changing direction in the face of the current newsflow," Kerr said.
"Earnings estimates for this year and next still appear too high and inconsistent with the direction of newsflow on the economy. I envisage some sort of trading range while the debate over economic growth develops."
On Wall Street, the Dow Jones industrial average was off 0.2 per cent up at 8,857 points, while the tech-laden Nasdaq Composite rose 0.7 per cent.
The day provided a brief flurry of scorecards as Europe's earnings season draws to a close.
Shares in Axa surged 5.5 per cent after the French insurance giant cheered investors with a smaller-than-expected drop in first-half net profits, as robust underlying growth in its property and casualty business helped offset provisions for its battered share portfolio.
Among other insurers Zurich Financial added 10 per cent, also fuelled by fresh talk that Europe's number three insurer was a takeover target, this time for US sector giant AIG.
The companies were not immediately able to comment. German airline Lufthansa surged seven per cent after posting operating profits that beat all analysts' forecasts thanks to cost and capacity cuts made in response to the industry slump after the September 11 attacks on the United States. (Reuters)
The news lifted other airline shares, with Air France up 9.2 per cent, while British Airways gained 3.6 per cent.
Swiss food giant Nestle saw its shares gain three percent after its first-half profit rose sharply as the initial public offering of its eye care unit Alcon boosted the bottom line of the world's largest food group.
Deutsche Telekom reported second quarter core earnings that rose to 3.975 billion euros from 3.6 billion a year earlier, to meet market expectations.
The group, whose shares were down two percent, said it needed to raise up to seven billion euros to meet crucial debt targets and signalled it may sell or merge its US unit VoiceStream.
Shares in Swiss industrial engineering group ABB jumped 22 per cent after its chairman said a crucial asset sale remained on track and there were no liquidity worries.
Investors questioned whether the recent run-up is sustainable, especially considering the weak economic backdrop.
"Good corporate results have boosted the market today but there is still an open-ended question whether we are just seeing a bull rally in a bear market," said Alia Baig, head of European equities in London at Axa IM.
"It's August and people are still away so we'll have to wait for them to return to see whether this is just a blip."
But some chartists said recent gains were likely to hold. "It's quite resilient. Our view is that confidence has come back into the market after a significant low point in July," said Mark Glowrey, a technical analyst at StockCube.
Stocks should trend higher by year end, he said. "One caveat is that our indicators are not quite as optimistic for next year, so it does not necessarily mean we are out of the woods in the long term," Glowrey said.