European blue chips leapt off six-year closing lows yesterday, following volatile afternoon trading featuring a key address from UN weapons inspectors on efforts to disarm Iraq in the face of a possible US-led war.
The market was meanwhile boosted by insurers after solid figures from France's Scor and by oil majors like TotalFinaElf after crude prices hit a two-year high.
But a near halving in Invensys shares after a profit warning from the British engineering firm and concerns about future dividend policy at bank Lloyds TSB helped ensure London underperformed the rest of the region.
Shares soared as comments by UN arms inspectors raised hopes war in Iraq might be delayed, and then pared gains as US officials reaffirmed a tough stance on Baghdad, leaving investors back at square one.
"I don't think anything materially has been altered by the (UN) speeches. It doesn't spell an end to the uncertainty," said Kevin Gardiner, European equities strategist at Credit Suisse First Boston.
By 1816 GMT, with only Frankfurt still trading officially, the FTSE Eurotop 300 index of pan-European blue chips was up 1.68 per cent at 782 points, as the narrower DJ Euro Stoxx 50 rose 3.45 per cent to 2,196 points.
The Eurotop 300 closed at its lowest level since February 1997 on Thursday and is up around one per cent over the week.
Insurance stocks such as Axa and Munich Re topped the blue chip leaderboard with gains of more than six per cent after Scor said sales rose 2.6 per cent last year, helped by better rates at its non-life reinsurance unit.
The presentation to the UN Security Council by the UN's chief weapons inspector Hans Blix and his colleague in charge of nuclear arms, Mohamed ElBaradei, had been seen as pivotal on whether wavering council members will authorise a US-led war against Iraq or call for more inspections.
The United States and Britain, who want a second UN resolution backing the use of force, have said they will go to war without one if necessary. US Secretary of State Colin Powell, speaking after Blix, said the inspections process could not be "endlessly strung out".
On Wall Street, the Dow Jones industrial average was flat and the tech-laden Nasdaq Composite up 0.34 per cent.
US markets are closed on Monday for the President's Day holiday.
Shares in Invensys fell by 46 per cent after it warned second-half earnings may slump partly because of problems at a Dutch unit, just a week after ruling out a trading statement.
Lloyds TSB fell 7.3 per cent as investors fretted about future dividend policy after Britain's fourth biggest bank reported an 18 per cent profit drop.
Renewed talk of banking consolidation also boosted German banks HVB Group and Commerzbank, after Commerzbank's chief executive said he was generally open to the idea of mergers in the ailing German financial sector.
Meanwhile, food and beverage stocks received a fillip after an upbeat forecast from French food group Danone, which saw its shares gain 2.45 per cent.
Dutch vitamins giant Numico had mixed fortunes, plunging up to 27 per cent on balance sheet concerns after the firm said its chief financial officer would step down, before ending 5.6 per cent down, after a local newspaper report said Danone was mulling a takeover bid.
Elsewhere, Six Continents jumped 4.5 per cent as investors showed their relief after they were spared a profit warning from the world's No.1 international hotel group at its annual general meeting, amid hopes its imminent break-up might attract a buyer.
Shares in French IT consultant Cap Gemini fell as comments by Chief Executive Paul Hermelin in a television interview ignited fears over the group's outlook.
Cap Gemini said that comments by its CEO did not point to further market deterioration in 2003 though recent trends showed no significant signs of a recovery.