European stocks rallied yesterday as markets set aside global security concerns, focusing instead on a profits bonanza at reinsurer Swiss Re and Spanish retailer Inditex.
Swiss Re jumped 6.6 per cent after it trounced forecasts with a swing to a net profit of 1.7 billion Swiss francs ($1.33 billion) and predicted that earnings over the next three years would match the boom years of the late 1990s.
The DJ Stoxx index of insurance stocks rose three per cent as investors banking on further equity market gains decided that the sector - normally one of the first to benefit from higher stock prices - looked cheap.
Zurich Financial added 2.7 per cent, France's AXA rose 4.5 per cent, Germany's Allianz ended up 2.7 per cent and Dutch-listed ING topped the blue-chip charts with a gain of 5.7 per cent.
The FTSE Eurotop 300 index of pan-European blue chips ended up 1.25 per cent at 971.4 points, its highest close this week. Amid good volumes, gainers outnumbered losers by five to one.
The narrower DJ Euro Stoxx 50 index surged 1.86 per cent to 2,752.4 points. But the market is still some five per cent below a 20 month high above 1,028 points set earlier in March.
"Sentiment slipped after the bombings in Madrid and the market is still very nervous," said Philip Gijsels, senior equity strategist at Fortis Global Markets.
"But economics and earnings still look good... We think the market is likely to recover and will probably set new highs. But it depends on how long geopolitical uncertainty lasts."
Strategists said stock markets around the world are also at the mercy of US economic data, which in the last few weeks has been mixed, and that the real test is jobs growth.
If March non-farm payrolls data confirms that economic growth in the United States can be sustained, then confidence is expected to grow.
"That piece of data is crucial for equity prices," said a fund manager. "Even strong corporate profits growth won't be able to offset a lack of new jobs, because then consumer spending will stagnate and so will company profits."
On Wall Street, the Dow Jones industrial average was up 0.9 per cent at 10,140 points, while the tech-laden Nasdaq Composite was up 1.8 per cent at 1,943.8 points.
Technology stocks in Europe climbed too, led by chip stocks after US chip equipment maker Applied Materials said the industry's sales recovery "is in the early stages, not the later stages".
Dutch chip equipment maker ASML Holdings jumped 6.5 per cent and London-listed chip designer Arm Holdings gained 2.2 per cent, while French communications equipment maker Alcatel notched up 4.1 per cent.
But Infineon gave up gains of about three per cent to end 1.2 per cent lower after its chief executive, Ulrich Schumacher, suddenly stepped down with immediate effect.
The German chip maker declined to comment on the reason for his departure, but industry sources said management would not agree to Schmacher's restructuring plans.
Across Europe, London's FTSE and Paris's CAC closed up 1.5 per cent, Frankfurt's DAX rallied 2.3 per cent and Zurich's SMI advanced 1.6 per cent.
Among retailers, fortunes were mixed as Inditex, owner of the Zara fashion chain, soared 13.1 per cent after forecast-topping profits and a higher dividend sparked several broker upgrades.
But Sweden's Hennes & Mauritz slipped 0.8 per cent, despite strong first-quarter profits, as disappointing February sales spurred some investors to switch to Inditex.
In the luxury goods sector, Swatch rallied 3.2 per cent after its profits and dividend beat forecasts and the company said it expected higher sales this year.
Traders said Swatch is on the hunt for jewellery acquisitions and has been linked with Italy's Bulgari, which leapt 5.7 per cent on talk of a bid.