European blue chips extended their recovery from six-year lows late yesterday, with AstraZeneca at the helm after a reassuring earnings statement from the Anglo-Swedish drugs giant.
Equity-heavy insurers such as Axa helped fuel the broad-based gains after markets posted a nine-day losing run through Monday amid mounting war fears, before steadying on Tuesday and Wednesday.
"The markets were getting to the point where they were oversold in the short term, so a bounce was always on the cards," said David Thwaites, pan-European strategist at BNP Paribas.
However, German insurers Munich RE and Allianz bucked the otherwise firmer trend as investors grew nervous about possible stake sales by shareholder bank HVB, moves which helped ensure Frankfurt underperformed the rest of the region.
By 1638 GMT, with only Frankfurt still officially open, the FTSE Eurotop 300 index of pan-European blue chips was up 2.5 per cent to 796 points, while the narrower DJ Euro Stoxx 50 gained 2.2 per cent to 2,236.
The late-trading German Dax index index eased 0.5 per cent, but other national benchmarks pushed higher.
Gains were broad-based, with rising stocks outnumbering fallers by about five to one, as firms with significant US exposure took heart from a pullback in the euro.
Trading volumes were above average.
Yet, not all strategists were convinced that the outlook for shares would improve irrevocably if a US-led military strike against Iraq proved short and successful.
"The market is focusing on the post-war environment and is beginning to realise that an Iraqi war won't clear up the world's economic problems and may even exacerbate geopolitical tensions," said Clive McDonnell, a European strategist at Standard & Poor's.
Echoing similarly bearish calls made by technical analysts, he said shares would have to fall another eight per cent or so to reach 'fair value'. McDonnell said fair value for European shares equated to a share price equal to around 11 times earnings, if the differential between bond yields and equity yields in the bear markets of 1974 and 1982 was any guide.
Shares in AstraZeneca surged 8.1 per cent after it reported better-than-expected 2002 results and set firm guidance for this year's widely expected downturn.
Astra also predicted a strong recovery from 2004.
Insurers bounced after slumping on Wednesday amid worries over the impact of tumbling share prices on their finances and a further round of negative comment from credit ratings agencies.
Shares in major insurers rebounded, with Dutch group ING up 7.1 per cent, Aegon up 5.9 per cent and AXA up 7.1 per cent.
But Munich Re sank 2.8 per cent and Allianz fell 2.1 per cent after German bank HVB said it could sell its significant equity holdings in both insurers as part of a revamp.
Shares fell sharply in Nordic paper & pulp giants Stora Enso and UPM-Kymmene after both posted lower-than-expected fourth-quarter profits due to weak demand and low prices and warned of poor earnings in 2003.
UPM sank more then 10 per cent, and Stora shed 5.25 per cent.
But airlines spiked higher, led by Ryanair and British Airways, after falling heavily in recent weeks amid concerns over the likely impact of war on air travel.
In New York, the Dow Jones industrial average fell 0.1 per cent, and the tech-laden Nasdaq Composite dipped 0.5 per cent.
Earlier, US real GDP data showed the world's biggest economy expanded by an annual 0.7 per cent in the fourth quarter exactly in line with estimates. There had been some fears that the report would reveal a quarter-on-quarter contraction.
The figure nonetheless marked a sharp deceleration from the third quarter's four per cent pace and made it the slowest quarter of the year.