European equities lifted

Prudential and Nokia gave European equities a lift at the end of a difficult quarter yesterday afternoon on bargain-hunting, and after UK regulators eased insurers' stress tests to stem forced sales of shares.

A firmer Wall Street bolstered sentiment too. Equities were proving resilient to news that troubled US office equipment group Xerox discovered a $2.0 billion revenue gap in its books just days after global markets were hit by the biggest accountancy scandal on record.

"Xerox has already been in trouble with US regulators, so this announcement is not a surprise," said a strategist at a German bank who declined to be named.

By 1420 GMT, the FTSE Eurotop 300 index of pan-European blue chips was up 2.7 per cent while the narrower DJ Euro Stoxx 50 rose 3.6 per cent.

Stocks have lost about 17.5 per cent of their market capitalisation this quarter and are languishing near nine-month lows.

"Markets look set to rebound 15-20 per cent over the short-term but this does not look particularly sustainable," said Roland Gilbert, a European fund manager at Frankfurt Trust GmbH which has about E15 billion under management.

"Macro-economic data is improving but prices are being held back by poor sentiment on corporate earnings, which are difficult to trust given US accounting irregularities."

The DJ Stoxx insurance sector was up 4.6 per cent as British insurers surged on news the UK regulator had eased stress tests to stem the companies from having to sell their share holdings at knockdown prices to meet solvency tests.

Shares in British Prudential and CGNU were up more than six per cent each.

Insurers have been hit hard in recent sessions on fears they were struggling to stay afloat as a two-year bear market turned worse.

Technology, another sector also hammered, was up four per cent in Europe as valuations began to look more attractive. Sector leader Nokia was up 5.6 per cent.

On Wall Street, the Dow Jones Industrial Average index was 0.78 per cent firmer while the tech-heavy Nasdaq Composite was 1.41 per cent higher.

Wall Street was also shrugging off Xerox's announcement it would have to restate revenues over a five-year period by around $2 billion.

The Stamford, Connecticut-based group, which has already been fined once before for improper accounting, said it would shave the $2 billion from revenues between 1997 through 2001.

The revelation comes just days after US telecoms carrier WorldCom shocked investors by saying it had hidden nearly $4.0 billion in expenses, adding to already deep worries about the trustworthiness of Corporate America.

Markets were supported by news US consumer sentiment is continuing to fuel the economy's sluggish recovery from recession. Consumer spending makes up two-thirds of the US economy.

The University of Michigan final consumer sentiment index for June fell to 92.4 from 96.9 in May but was above a preliminary reading of 90.8.

"This is a small positive revision but it is unlikley to have a huge market impact," said James Knightley, a global economist at ING Financial Markets.

"This data is still consistent with a recovery in the U.S. economy, although it has fallen since May, it is still well above its September lows."