European shares were hoisted higher by gains in insurers such as Credit Suisse and Munich Re yesterday amid market perceptions the US-led war against Iraq had entered a decisive phase.
British telecoms group Cable & Wireless topped the leader board after appointing a new chief executive, while Swiss engineering group ABB jumped on news a $1.2 billion settlement for asbestos-related injury claims was on track.
German luxury carmakers Porsche and BMW led European auto stocks higher after they said that new models had helped them sell more cars in the United States last month.
Broader sentiment was lifted by news that US forces had advanced to within 30 kilometres of the Iraqi capital Baghdad, raising expectations for a swifter end to a conflict that has sapped confidence from financial markets.
"We've had a couple of days thinking the advance had stalled and that guerilla tactics were slowing down the allies. Now suddenly the allies seem to be making real progress closing in on Baghdad very quickly," said Nigel Cobby, managing director of European equities at J.P. Morgan in London.
By 1538 GMT, the FTSE Eurotop 300 index was up 3.1 per cent at 778 points in a broad-based rally that placed advancers at a 14-to-one majority over decliners.
"If we continue to get reasonable news out of Iraq then I think the rally can continue, but it's not being accompanied by higher volumes and its not being accompanied by long-only funds putting any liquidity into the market."
Cobby said much of the activity was short-covering as well as players establishing short-term bullish trading positions. "It could turn around again tomorrow, but equally it could keep going," he added.
The narrower DJ Euro Stoxx 50 index rose 4.3 per cent to 2,156 points.
The gains left the market poised to clock up its biggest one-day gain in a week, but analysts warned the market's mood would continue to hinge on news from Iraq.
"The market remains fickle at the moment. Our advice is to keep the TV on, which gives a fair indication of what will go on in the market," said Clive McDonnell, a European strategist at Standard & Poor's equity research.
Wall Street also drew strength from the news out of Iraq. The Dow Jones industrial average jumped 2.4 per cent and the tech-laced Nasdaq Composite added 3.1 per cent.