European shares bounced sharply from near six-year lows late yesterday, as investors bought volatile technology and insurance stocks after earnings from Converium and Philips beat expectations.
But trading volume was below average after a much-touted speech by Federal Reserve Alan Greenspan failed to jolt markets out of their war-related stupor, as traders braced for Friday's key address by weapons inspectors to the UN Security Council.
"There are no clear trends in the market. People are staying pretty close to their benchmarks," said Des Flood, a European fund manager at Hibernian Investment Managers in Dublin.
By 1645 GMT, with only Frankfurt still trading, the FTSE Eurotop 300 index of pan-European blue chips was up 2.4 per cent at 788 points, as advancing stocks outpaced decliners by nearly six to one.
The euro zone DJ Euro Stoxx 50 index rose 3.0 per cent to 2,190 points.
All major national benchmarks posted sharp gains, but the majority remained near multi-year lows.
Greenspan said geopolitical fears created "formidable barriers" to business spending and added to economic uncertainties, but called better US job data in January "somewhat more encouraging" for the world's biggest economy.
Some investors drew hope from an Iraqi concession on U-2 spy plane flyovers as political gridlock within Nato and among Security Council members deepened over how best to disarm Iraq after the US said "the game is over" for Baghdad.
A German government source told Reuters that all but four of the 15 UN Security Council members support prolonging the weapons inspections, defying the US view.
Chief UN weapons inspectors Hans Blix and Mohamed ElBaradei, who are monitoring Iraqi willingness to disarm, are due to report back to the Security Council on Friday.
Converium, reporting its first full year as a quoted firm after demerging from Zurich Financial, rose one percent after posting better-than-expected profit.
Elsewhere in insurance, Germany's Munich Re, Dutch groups Aegon and ING, Benelux powerhouse Fortis, France's Axa and Italy's Generali all rose by more than five per cent.
Philips shares rose 5.7 per cent as investors turned positive on the company's results after the Dutch diversified maker of electronic goods and semiconductors posted better-than-expected 2002 operating profit and after analysts were told that some of its loss-making units had turned the corner.
Finnish tech bellwether Nokia was also in demand, rising 4.75 per cent.
Meanwhile, shares in Tele2 surged 11.2 per cent after Sweden's second-biggest telecom operator beat market expectations with its fourth-quarter profit and said it expected to pay out its first dividend this year.
It was a similar story at another Swedish firm, Sandvik, which jumped 7.2 per cent after the specialty steel and tools maker posted higher-than-expected fourth-quarter profit and reported a surge in new orders.
But Dutch drugs and chemicals firm Akzo Nobel sank 4.9 per cent after warning that net profit would fall by more than 10 per cent this year, far worse than expected.
Shares in Sweden's Securitas slumped 8.5 per cent after the world's No.1 security services group posted a 38 per cent rise in 2002 pre-tax profit but gave a cautious outlook.
Rivals such as Denmark's Group 4 Falck fell 5.8 per cent and Britain's Securicor slipped 4.6 per cent.
On Wall Street, the Dow Jones industrial average was down 0.2 per cent at 7,905 points, while the tech-laden Nasdaq Composite gained 0.5 per cent to 1,302 points.
The split between the US and some European countries on what to do with Iraq, and the possibility that it might scupper plans for a second UN resolution authorising military action, was the worst of possible outcomes for markets, experts said.
"No war would be good for markets but a quick sharp war would also be taken favourably. Continued delay is a negative," said Hibernian's Flood.
London and Washington have both reserved the right to attack Iraq without a second UN vote, but UK Prime Minister Tony Blair has conceded he would have a problem convincing Britons of the case for war without a fresh UN mandate.
Investors were divided over whether pent up demand will boost shares once a possible war is out of the way, but some on the sell side were optimistic.
"We've got to see some kind of resolution in the Middle-East, but aside from that this it is a cheap market with recovering fundamentals," said Ben Funnell, a European equities strategist at Morgan Stanley.
"We still hold the same bullish view as we did before Christmas and believe markets will end the year higher."