European shares jumped almost two per cent yesterday, led by a rebound in basic resource stocks as concerns of a sharp slowdown in China eased, and taking heart from a brief dip in high oil prices.
Beaten-down technology stocks also found favour, helped by a strong performance from US bellwether Hewlett-Packard which rallied after reporting better-than-forecast results late on Tuesday.
The FTSE Eurotop 300 index of pan-European blue chips closed 1.7 per cent firmer at 982.5 points on solid turnover of around €3.2 billion. Stocks which rose outnumbered those that fell by almost eight to one.
The narrower DJ Euro Stoxx 50 index rose two per cent to 2,729.5 points.
Some strategists said the rebound may be short-lived, however, as markets looked ahead to rises in interest rates from the US Federal Reserve.
"You've had markets discounting strong economic data, you've had concerns that inflation pressures are rising, you've had high oil prices and the conclusion is that the Fed may be behind the curve," Merrill Lynch strategist Khuram Chaudhry said.
The Eurotop 300 is down 4.8 per cent since hitting a 22-month high of 1,031 last month but, historically, corrections had been greater, sentiment more depressed and valuations more compelling before such corrections reversed, Mr Chaudhry said.
"Those three aspects lead me to question the strength of any current rally."
Techs, miners and other "growth" sectors highly influenced by the economic cycle have taken a battering in recent weeks as investors unwound trades which led markets in the year-long rally that started in March 2003.
"The current market context of impending interest rate hikes and surging oil prices continues to favour value stocks over growth stocks," SG Equity Research said in a note, highlighting utilities, energy, chemicals and autos as sectors with the strongest value features.
Yet London-listed miners starred yesterday after China ruled out an immediate interest-rate hike, cooling fears of a sharp slowdown in the industrial demand that has underpinned strong gains in prices for metals, minerals and commodities.
Anglo-American added 6.1 per cent and Xstrata added 6.6 per cent, while copper miner Antofagasta jumped 7.4 per cent.