European shares trimmed their advance yesterday afternoon after data showed the US manufacturing base contracted in September, though oil, insurance and banking stocks kept bourses on a firmer footing.
The US Institute for Supply Management's index fell to 49.5 in September from 50.5 in August, its first move below 50 since January, raising fears the US economy may be stalling as corporate profits already struggle to recover.
A number below 50 signifies contraction. "We were in the mid-50s through most of the first and second quarters and have since slipped steadily - the trend is definitely down," said Peter Ostler, head of research at futures brokers GNI.
US factory executives said they were worried about the impact of higher energy costs and a possible US war on Iraq on business activity.
Separately, US construction spending fell 0.4 per cent in August to hit a six-year low.
By 1415 GMT, the FTSE Eurotop 300 index was up 0.5 per cent at 822 points, recouping some of the 4.8 per cent it lost on Monday.
The narrower DJ Euro Stoxx 50 index rose one per cent to 2,227 points.
On Wall Street, the Dow Jones industrial average was up 0.36 per cent at 7,618 points in opening trade, while the tech-laden Nasdaq Composite shed 0.6 per cent.
France Telecom and Deutsche Telekom rose on the prospect that the debt-laden telecoms duo would get new bosses soon, while a positive outlook from UK mobile operator mmO2 also helped the sector.
Oil stocks provided the strongest underpinning as crude oil prices zoomed above $29 a barrel in London after Iraq said that threats of a US-led military action against it would not intimidate the country into accepting a possible new UN resolution.
Among the top blue chip advancers, shares in German drug and chemical group Bayer rose 4.2 per cent, as a rebound from Monday's big drop was helped by news that the US medicines watchdog had approved an increase in the capacity of its haemophilia drug Kogenate, which had production problems last year.
Media group Vivendi Universal was up 4.5 per cent as it finally agreed a deal with News Corp for the disposal of Italian pay-TV operator Telepiu.
But shares in Britain's Six Continents, the world's largest international hotels group, sank 10 per cent.
The group said it would spin off its UK pubs and restaurants and return £700 million to investors, but the stock was hit on an effective dividend cut.
UK banks were strong, helped by investment bank WestLB raising its recommendation on the sector, arguing the recent heavy falls in those shares made them good value.
Shares in Barclays Bank rose 4.7 per cent, with HBOS up four per cent.