European shares vaulted higher yesterday as investors bet on a quick war against Iraq after the United States, Britain and Spain ended diplomatic efforts to win UN approval for an ultimatum to Baghdad to disarm.
Dutch insurer ING led the charge higher as the insurance and tech sectors, which tend to exaggerate broader market movements, climbed more than four per cent apiece.
Energy stocks also rallied, shrugging off a steep decline in oil prices to their lowest levels since January.
"The market believes the war will be short and quick, so there should be a relatively soft landing for crude oil prices," said Charlie Luke, oil analyst at Aberdeen Asset Management in London.
At 1630 GMT, with only Frankfurt still trading, the FTSE Eurotop 300 index of pan-European blue chips was up 3.3 per cent at 779.26 - a three-week high - after reversing an earlier loss of 3.2 per cent.
The narrower DJ Euro Stoxx 50 index rose 3.7 per cent to 2,157.34.
"Perhaps this is the war rally everyone has been hoping for," said Nomura global strategist Anais Faraj.
Investors have shied away from equities in recent months because of uncertainty about a possible war against Iraq. Strategists have predicted that once the uncertainty lifted, pent-up demand would drive equities higher again.
"But if this is the victory rally it is going to be short-lived unless we get that perfect war that follows on, which is a week or two and then a victory parade and then back out again," Faraj said.
On Wall Street, the Dow Jones industrial average leapt 2.4 per cent and the tech-laced Nasdaq Composite rallied 2.8 per cent as investors there also bet on a short war.
"The release of the uncertainty one way or another should have positive implications for the equity risk premium which has risen sharply in 2002 and 2003," said Florent Brones, global equity strategist at BNP Paribas in Paris.
Insurers - which tend to exaggerate the broader market's movements - topped the leader board, headed by Dutch group ING and Benelux banking and insurance group Fortis.
ING had earlier fallen almost 10 per cent after it posted a net loss of 9.6 billion euros after taking a 13.1 billion euro goodwill charge.
French insurer Assurances Generales de France also reversed an earlier steep loss on the back of a 63 per cent fall in 2002 profits to end 4.7 per cent higher.
Among tech stocks, which like insurers also carry a high beta - or market-sensitive - status, Swedish telecom equipment maker Ericsson jumped 14.3 per cent after it named a new chief financial officer and deputy chief executive officer.