European shares rose yesterday but an early Unilever-led surge lost steam as data showed that US economic recovery was muted, leaving more room for disappointment in company profits.
Among the day's big movers, German drug and chemical firm Bayer slid 6.7 per cent ahead of its results today.
Oils were strong as crude prices continued to advance and companies in the sector reported a string of solid earnings. Airline stocks also took off on better profit hopes.
The extreme volatility seen in the past two weeks was largely absent as the market continued to consolidate Monday's massive gains, though the jury was still out on whether the worst of the bear market is over.
"The comeback we have seen since last Wednesday concluded the downswing which started in March," said Achim Matzke, head of index analysis at Commerzbank in Frankfurt.
"To conclude the bear market since early 2000, you need a bottoming formation over several months and not just a few days."
By 1536 GMT with most bourses shut, the FTSE Eurotop 300 index was up 0.7 per cent at 960 points, while the narrower Euro Stoxx 50 index of euro zone blue chips had gained 0.4 per cent to 2,702 points.
Last Wednesday the Eurotop 300 hit five-year lows and has risen 11 per cent since then. It is still down by about a quarter for the year.
On Wall Street, the Dow Jones industrial average was off 0.8 per cent at 8,605 points. The tech-studded Nasdaq Composite was down 1.7 per cent.
The European benchmarks got a boost from Anglo-Dutch consumer goods giant Unilever, which raised its 2002 earnings forecast as it pledged to invest in advertising to spur growth in its top brands.
Europe's biggest consumer products group also reported a higher-than-expected core profit. Unilever shares in Amsterdam rose seven per cent.
"With a lot of disappointments in the market lately, I think that explains the share reaction. These are very strong results," said Albert Breekveldt, an analyst at Julius Baer bank in Amsterdam.
Among the other standouts, shares in Norway's Petroleum Geo-Services plunged 68 per cent as investors focused on a possible cash squeeze in spite of the fact that second-quarter earnings were lifted by one-off gains.
Shares in Germany's Fresenius Medical Care, the world's largest provider of dialysis products and services, dropped nine per cent after a US court ruling revived fears about its exposure to asbestos claims.
The stock was also hit by a CSFB downgrade following its disappointing second-quarter results and its decision to revise its guidance downwards.
Royal Dutch/Shell led Europe's strong gains in the energy sector as investors bet the Anglo-Dutch group will unveil a robust scorecard today. Shell gained 4.3 per cent in London.
Airline stocks rose after Germany's Lufthansa gave an upbeat outlook on 2002 profits and ordered 10 Airbus A330-300 planes.
Lufthansa shares rose 4.7 per cent, while British Airways jumped 7.3 per cent. Dutch KLM was up 9.7 per cent, with Air France 4.3 per cent ahead.
Shares in aircraft maker EADS, which makes Airbus planes, gained 1.8 per cent.
Investors continued to scrutinise the week's key economic numbers, which showed a flagging recovery as the recent stocks slide takes its toll.
The US economy grew by just 1.1 per cent during the April-June quarter - half the 2.2 per cent rate estimated by Wall Street economists and a long way short of the blistering but downwardly revised 5.0 per cent pace posted in the first three months of the year.
Mathew Wickens, a global economist for ABN Amro said the report, taken together with recent stock market weakness and its negative impact on consumer confidence, "placed a question mark over the sustainability of economic growth in the second half of the year.
"This is one for the double-dippers," he added. Other economists said the numbers confirmed that recovery will be muted. On Tuesday it was reported that US consumer confidence sank in July.