Deutsche Telekom led European blue chips a notch higher yesterday afternoon with Wall Street's opening gains lending enough strength to offset losses from heavily weighted insurance shares.
Pleasing earnings from British broadcaster Granada also helped boost confidence.
Investors are tiptoeing back into equity markets after a wave of suicide bombings at the weekend and a new surge in the euro pushed global stock markets sharply lower on Monday.
"The risk premium surged following the recent bombings and there was also a lot of disappointment that the G7 finance ministers came up with no economic policy measure, explaining why the markets slid that much on Monday," said Alain Bokobza, European equity strategist at SG Securities in Paris.
Bokobza said the impact on equities of the weak dollar had been overdone, adding that the main factor determining the market's direction now was to know whether or not economic policies were sufficient enough to avoid deflation.
"I still think markets are in a trend of moderate gains in the medium term, based on lower oil prices, slightly decreasing risk premium and expectations of economic reacceleration in early 2004," he said.
By 1400 GMT, the FTSE Eurotop 300 index of pan-European blue chips was up 0.38 per cent at 805 points and the euro zone DJ Euro Stoxx 50 index gained 0.3 per cent.
Europe's national benchmarks were all up a fraction while the Dow Jones industrial and the tech-laced Nasdaq Composite added 0.5 and 0.7 per cent respectively.
The Eurotop 300 is hovering around the bottom of a six-week trading range, having previously rallied by more than 20 per cent from March's six-year lows.
Shares in Deutsche Telekom rose four per cent after new Chief Executive Kai-Uwe Ricke told the group's annual general meeting he expected good first-quarter results would prove to be no exception and that the group may post a profit in 2003.
But shares in French and Dutch insurers Axa and Aegon fell roughly three per cent each after investment bank UBS Warburg cut its ratings on both stocks.
British peer Legal & General added 3.6 per cent, buoyed by lingering market talk that it could be a takeover target for Royal Bank of Scotland or another predator.
In the media sector, Granada climbed seven per cent after it beat market expectations with a 35-per cent leap in half-year pre-tax profits.
But music giant EMI turned 10 per cent lower after it posted tumbling annual sales and predicted further declines this year as it grapples with a biting industry slump. Full-year profits rose thanks to harsh cuts to jobs, number of artists and labels.
Elsewhere, shares in British medical devices firm Smith & Nephew shed seven per cent after US-based Zimmer Holdings Inc announced a counterbid for Swiss group Centerpulse AG, threatening to drag Smith & Nephew into a costly bidding war.