European share gains were pared in late trade yesterday, as rumours of a second successive US corporate accounting scandal swirled markets and US stocks turned negative.
But a fightback by battered tech, insurance, and telecom stocks - headed by Terra Networks, Nokia, and mm02 - kept most of Europe's markets in the black as investors tried to forget Wednesday's WorldCom accounting scandal and warmed to a raft of positive broker comments.
By 1552 GMT, with most markets closed, the FTSE Eurotop 300 index was up 0.9 per cent at 1,035 points, but still around late-September levels and down about 16 per cent for the year.
The Euro Stoxx 50 index rose 1.34 per cent. Stronger-than-expected US first quarter GDP data offered some support by reminding investors that they were in an economic recovery, but underlying sentiment remained fragile and sceptics were not hard to find.
"I don't trust this rally as far as I could throw it," said Steve Barrow, a strategist at Bear Stearns.
"I don't see what's happening here as a harbinger of recovery for the market," Barrow added.
Strategists said the rebound from oversold levels was not a sign the worst was over or that investors had fully absorbed the WorldCom news that sent bourses tumbling on Wednesday.
The company faces fraud charges from US regulators for inflating its books as it restates accounts to show a loss for last year instead of a profit.
But some strategists dared to suggest that a bottom may yet be close at hand because of favourable valuation trends.
"A couple of percentage points more and the US market will be at 17-18 year lows relative to bonds," said Michael O'Sullivan, pan-European equities strategist at Commerzbank, who nonetheless recognised that the market could overshoot on the downside.
On Wall Street, the Dow Jones industrial average lost 0.36 per cent while the tech-laden Nasdaq Composite was flat. Both indices had opened higher.
Terra Lycos was a star performer, soaring 12.7 per cent after Morgan Stanley upped its recommendation on the Spanish internet service provider to "overweight" from "underweight".
Meanwhile, Finland's Nokia added 4.6 per cent after Goldman Sachs upgraded telecom equipment makers to "neutral" from "underweight".
Insurers and financials such as ING Groep, Aegon and Credit Suisse Group, hit on Wednesday on fears they were exposed to WorldCom's debt or that they would need to shore up operations hit by slumping equities, continued to climb back thanks to positive broker comment.
Credit Suisse rose 6.7 per cent, after Morgan Stanley upgraded its recommendation on the stock, which remains near multi-year lows.
Europe's insurers were upgraded to "neutral" from "underperform" by JP Morgan, whick also raised its rating of Allianz to "buy", lifting the German insurer by 2.5 per cent.
"We believe concerns over the solvency position of insurers are overstated," JP Morgan analysts said in a research note.
British phone groups mmO2, BT, and Vodafone also recouped some of Wednesday's losses due to the fallout from WorldCom, as investors shrugged off concerns that they too could have accounting skeletons in the cupboard.
"Unlike elsewhere in the sector, Vodafone, BT, and mmO2 have relatively strong financial positioning," said analysts at Bear Stearns in a note to clients.
BT and Vodafone added 0.4 per cent and 2.31 perecnt respectively, while mm02 leapt 9.7 per cent to a four-week high.
Tomra Systems jumped 17 per cent after Germany's constitutional court okayed moves to introduce deposits on non-returnable drink cans and bottles, in a move seen benefiting the Norwegian maker of recycling machines.
Another sector doing well were chip-related stocks, after broker Lehman Brothers upped its rating of US semiconductor stocks to "market weight/sight overweight" from "underweight".
Franco-Italian STMicroelectronics added 7.5 per cent, Germany's Infineon Technologies rose 4.6 per cent, British chip designer ARM Holdings jumped 4.8 per cent, and Dutch chip gear maker ASML was up six per cent.
French telecom equipment maker Alcatel extended its 16 per cent slump on Wednesday. It was down 5.9 per cent as investors still shunned the stock after its shock profit warning on Wednesday.
Meanwhile, data showed the US economy raced ahead at a revised 6.1 per cent in the first quarter.
That was its fastest clip in more than two years and up from earlier estimates, reflecting a better-than-expected showing for consumer spending and business investment.