European stocks posted their fifth straight day of gains yesterday as hopes for a swift and decisive war in Iraq were bolstered by reports of US troop movements ahead of a conflict that may be less than a day away.
French drinks group Pernod-Ricard was among the top gainers in a broad rally that placed advancers ahead of decliners by a two-to-one margin.
Allianz gained five per cent as it braced for a dramatic overhaul of its ailing Dresdner Bank division yesterday, a day after a top-level management shake-up in which Dresdner's chief was replaced by a rival from Deutsche Bank AG.
By 1635 GMT, the FTSE Eurotop 300 index was up 1.3 per cent at 791.15 points, bringing the pan-European blue-chip benchmark's gains to almost 16 per cent since last Wednesday.
"The market's rise is not just a reaction to the realisation that the period of uncertainty is coming to an end, but also the realisation that markets are fundamentally cheap," said Roger Hornett, chief executive officer and global strategist at Gilissen Securities in London.
"What the markets are telling us is that last Wednesday's lows should never have been reached. The valuation levels of the new lows that were established in Europe last week made the market look cheaper than they have been in 20 years," Hornett said.
The narrower DJ Euro Stoxx 50 rose 1.4 per cent to 2,182.83.
Wall Street was steady, consolidating its eight per cent gain over the last week, which some traders suggested may have been too much too soon.
The Dow Jones industrial average eased 0.4 per cent as the Nasdaq Composite fell 1.3 per cent after weak sales figures from US software group Oracle overnight.
French drinks group Pernod Ricard rose 7.9 per cent, lifted by a forecast-beating 15 per cent rise in 2002 net profit, thanks to a year's help from its new Seagram brands, but the group gave no 2003 guidance, citing geopolitical uncertainty.
Europe's airline and aerospace stocks slid on fears their credit ratings may be cut because war would weigh on demand, and European software shares sagged after Oracle late on Tuesday reported key software sales fell short.
Europe's largest software house Germany's SAP fell 4.6 per cent, while France's Business Objects dropped 4.9 per cent.
Oil stocks rose as the price of crude rallied after falling for four straight sessions. BP was 0.4 per cent firmer, Royal Dutch was up two per cent and Shell was 0.6 per cent stronger.
Elsewhere, German drug group Bayer slid 7.5 per cent, giving back some of its 40 per cent advance in late trade on Tuesday after a US court's decision to dismiss a lawsuit against the group's recalled anti-cholesterol drug Baycol.
The market's gains came as the 0100 GMT deadline approached, which US President George W. Bush has set for Iraqi President Saddam Hussein and his sons to leave Iraq or face war.
Sources said earlier yesterday that US-led forces had moved into the demilitarised zone that straddles the Iraq-Kuwait border, apparently in preparation for an imminent attack on Iraq.
Strategists said that despite some of the recent uncertainty lifting, the market was still pricing in a lot of bad news and the recent rally could have more steam in it if any war was short and decisive.
"The market is telling us that the war should be short - in other words it will be days rather than weeks - and hopefully with relatively little bloodshed," said Hornett.
"A quick and decisive war will see corporate budgets reactivated and therefore GDP growth can add to cost-cutting to improve profitability. So far profits have risen purely because of cost-cutting," he said.