European blue chip shares ended broadly firmer yesterday, buoyed by resurgent tech stocks and pleasing US economic data, but pared some of their gains amid lingering worries about an impending attack on Iraq.
The tech sector led the way higher, with Ericsson among the day's biggest gainers after a successful rights issue, while media titan Vivendi Universal rallied as investors warmed to the prospect of further asset sales. Chip-related stocks such as Infineon Technologies and ASML also drew strength from news overnight that Intel, the world's largest chipmaker, had set its revenue target in line with expectations.
By 1533 GMT, with only Frankfurt trading, the FTSE Eurotop 300 index of pan-European blue chips was up 2.9 per cent - paring its earlier 3.1 per cent gain - while the narrower DJ Euro Stoxx 50 index added 3.9 per cent. Despite the gains, the Eurotop 300 index was down around 3.4 per cent for the week, while the Eurostoxx 50 index fell 3.1 per cent in the same period.
On Wall Street, the Dow Jones industrial average was up 1.7 per cent as European markets closed, while the tech-studded Nasdaq rose 3.5 per cent.
The US market was buttressed by data showing the US unemployment rate dropped to a five-month low of 5.7 per cent from 5.9 per cent, helping to quell fears that economic recovery was slowing.
Sentiment in New York was also buoyed by figures showing non-farm payrolls grew by 39,000 in August, against expectations of a rise of 37,000, and a sharp revision in July data to show a 67,000 increase from an initially reported 6,000.
"The data was interpreted well and we had a lot of short-covering after it came out," said Krijn Moens, fund manager at Eureffect Asset Management.
The data comes after US business sentiment and German industrial data earlier this week sketched an outline of slowing global economic growth, dampening the outlook for corporate profits.
It also comes at a time when investors are concerned about the prospect of war with Iraq and of further attacks in the run-up to September 11.
Oil stocks fed on those fears and on reports that 100 warplanes had been involved in a strike on Iraq, which pushed oil prices to one-year highs and heightened fears of an impending massive US attack on the oil exporting country.
Among oil heavyweights, BP added 3.7 per cent, Shell rose 4.0 per cent and TotalFinaElf jumped 5.5 per cent. The index was up 4.3 per cent.
"There is a lot of uncertainty about Iraq. Things are looking a bit more explosive this time because there is less agreement on what to do," said Moens, adding that the uncertainty would spillover into next week.
"I expect the overall uncertainty to continue. Any good news recently has been used as an opportunity to sell and we should see the same again next week," he added.
One of the day's big gainers was Ericsson, which jumped 9.8 per cent after the loss-making Swedish telecom equipment maker said its heavily discounted $3.2 billion rights issue had been significantly oversubscribed.
Cash-strapped Vivendi Universal leapt 12.9 per cent after industry sources said the media group was mulling the sale of most of its publishing arm in a deal that could raise some $4 billion to $5 billion.
Shares in world's biggest handset maker Nokia surged 7.4 per cent as investors cheered the tech giant's unveiling of new mobile phone models with colour screens, in the hope they would boost the sluggish handset market.
Nokia will release a mid-quarter trading update on September 10 that is expected to show the company will meet its third-quarter earnings targets despite weak market conditions. The gains helped the Eurostoxx tech index rise 4.9 per cent to 192.21.
Among telecoms, Deutsche Telekom jumped 10.1 per cent after the company said it was in talks about the possible merger of its Voicestream unit with another US operator.
Sources familiar with the company tried to dampen speculation that a deal was on the cards by saying the talks were at an early stage, and that the German giant was considering many strategic options to cut its massive debt.
France Telecom also rallied 10 per cent, shrugging off an earlier tumble on fears that the debt-laden firm will post a record first-half loss and amid uncertainty about its ties with ailing German partner MobilCom.
There were also renewed speculation that chairman Michel Bon would soon be ousted.
Elsewhere, Zurich Financial soared 12.5 per cent as investors rushed to cover short positions amid rising optimism about the firm's ability to achieve its restructuring goal of $1 billion in increased revenues by 2003.
One of the day's big losers was Imperial Tobacco, which lost 3.4 per cent after US rival R.J. Reynolds Tobacco cut its earnings guidance for the third quarter amid heightened competition in the cigarette market.