Media giant Vivendi Universal and Deutsche Telekom led an overdue bounce in European shares yesterday, recouping some of the massive losses racked up in recent weeks although the outlook was still murky.
French telecom equipment maker Alcatel jumped eight per cent, Switzerland's Credit Suisse bank rose 7.4 per cent, two stocks that had been hammered in past weeks.
"You can certainly describe today as a technical bounce, but that is not going to be sustained if earnings growth does not come through," said Chris Johns, global strategist at ABN AMRO bank.
The dollar's swift slide also paused, calming nerves. "Sentiment is still terrible and nobody is trusting the rally. The most important event of the next few weeks will be the start of the next reporting season for the second quarter," Johns said.
Buyers shunned the debut of Italy's Pirelli & C. Real Estate , and shares in the property firm, controlled by the holding company of tyre maker Pirell, sank nearly 10 per cent as investors decided the offering was overpriced.
Economic data signalled that economic recovery in Europe and the United States was still underway, if losing some steam. Investor attention turned to the Federal Reserve's two-day interest rate-setting meeting which ends today, with market-watchers expecting rates to remain on hold.
By 1530 GMT, the Eurotop 300 index was up 2.5 per cent at 1,048 points, winning back some of the 14 per cent loss it suffered in the past five weeks of selling that pushed the benchmark to its weakest level in nine months by Monday.
The narrower Euro Stoxx 50 index of euro zone blue chips rose 2.9 per cent.
Yesterday's bounce was broad, with advancing issues outpacing decliners by more than six-to-one, with autos, technology, insurers and telecoms the strongest. Heavyweight oils also lent support, lifted by more gains in crude oil prices.
Fund managers said the bounce was justified. "From a rational perspective, the market has deteriorated much more rapidly than economic prospects," said Sandy Black of Deutsche Asset Management.
On Wall Street, the Dow Jones industrial average was up 0.8 per cent at 9,360 points, while the Nasdaq Composite, dominated by technology listings, was flat.
US investors look to earnings from two S&P 500 index constitutents, the chip maker Micron Technology, and hand held computer maker Palm after New York's close.
Many of the day's biggest gainers were stocks that have been hammered in recent weeks.
Beat-up Vivendi, which had slumped 23 per cent on Monday, rose 6.8 per cent with traders covering short positions against the backdrop of a board meeting as CEO Jean-Marie Messier faces dwindling investor faith in how he runs the world's second biggest media group.
Vivendi reiterated it would meet its 2002 financial targets. France Telecom, another recent casualty due to its ballooning debt, also tried to reassure investors by saying it would meet its financial targets.
France Telecom shares ended up two per cent, but not before hitting a record low following a credit-rating downgrade from Standard & Poor's.
Elsewhere in telecoms, Deutsche Telekom rose 7.4 per cent as it too bounced back from heavy selling on Monday.
Insurers, slammed on Monday amid fears the bear market would force them to seek fresh cash to counter weaker stock values, also rebounded as investors set aside those worries for now.
Germany's Munich Re was up 6.3 per cent, with Swiss Re up 5.3 per cent, and Zurich Financial five per cent ahead.
With another two to three weeks before the US second quarter earnings season gets underway properly, investors are left chewing over economic numbers as they worry about a return to recession, but yesterday's data eased those concerns.
The Conference Board said its closely watched index of US consumer confidence fell to 106.4 in June from an upwardly revised 110.3 in May, roughly in line with analysts' expectations.
Analysts said the index indicated that consumer spending, which powers two-thirds of the US economy, should stay solid.
Germany's key Ifo business barometer also fell in June when a slight rise had been expected, but the market viewed the drop as a temporary setback for Europe's biggest economy, with the pickup set to resume.
Meanwhile, the Federal Reserve's two-day rate-setting Federal Open Market Committee meeting winds up around 1815 GMT on Wednesday. No rate change is expected but investors hope the central bank will issue some ressuring comments about the economy.
US May durable goods orders and May new home sales numbers are also due today.