European shares eased yesterday as investors sold airline, hotel and tourism groups on news of two deadly blasts in Turkey - a popular holiday spot - but indexes ended well off their lows.
One of the blasts hit the Turkish headquarters of London-based global bank HSBC and the other damaged the British consulate. The second pair of bombings in the country in less than a week killed at least 26 people and wounded hundreds.
HSBC shares fell 1.26 per cent to 860 pence. A caller to Turkey's semi-official Anatolian news agency claimed responsibility in the name of Osama bin Laden's al Qaeda group, which Washington blames for the September 11 attacks.
"Terrorism is something we have to deal with on the market. We have got to get used to it," said Edwin Slaghekke, global fund manager at Theodoor Gilissen Bankiers in Amsterdam.
European bourses were helped late in the session by Wall Street, which shook off its opening losses to trade narrowly mixed.
The FTSE Eurotop 300 index, which traded higher before the Turkish blasts at mid-morning, ended down 0.2 per cent at 914 points, well off the day's lows as the market began to overcome the initial shock of the carnage in Istanbul.
Just over two shares fell for every stock that rose, in good volume.
"The short-term reaction is to sell stocks and buy bonds and gold, but if it stays quiet for a few months, then everyone will look at the fundamentals again. These things do not in general have a long-lasting effect on the market, only a shock effect," Mr Slaghekke said.
Improving fundamentals were seen in US jobless claims, which fell more steeply in the latest week than expected, while a closely watched US barometer of job conditions hit its healthiest level since before the 2001 recession began.
The DJ Euro Stoxx 50 index of euro zone blue chips closed down 0.2 per cent at 2,568 points.
Dealers said the market was already ripe for consolidation before this week's Turkish blasts - including the bombing of two Istanbul synagogues over the weekend - and a sharp slide in the dollar against the euro that slammed shares of European exporters.
The Eurotop 300 index is just 3.3 per cent below its 2003 highs of early November and is still up 6.6 per cent for the year, keeping alive investor hopes that bourses this year will snap a three-year losing streak.
Market volatility jumped yesterday morning, as measured by the VDAX "fear gauge" for German shares. The index spiked to its highest since mid-October as investors become more nervous about the outlook for stocks.