Eurostocks end turbulent week up, wary of March

European shares ended a turbulent week on a firmer footing yesterday, bolstered by a rally in tech stocks such as Cap Gemini, but investors cast a wary eye ahead to a month that may prove decisive for Iraq.

The volatile insurance sector recovered from a torrid week, led higher by Dutch insurer ING after it said it had "minimal" exposure to the bonds of Ahold, the global retailer embroiled in an accounting scandal.

Swiss-based industrial engineer ABB also rebounded from a steep selloff on Thursday, while a triple dose of encouraging US economic data bolstered the overall mood.

By 1656 GMT, the FTSE Eurotop 300 index of pan-European blue-chip shares was up 1.8 per cent at 768 points, but still down 2.3 per cent on the week. The narrower euro zone Euro Stoxx 50 jumped two per cent to 2,146 points.

Fund managers said the market was braced for an uncertain month ahead, when the United Nations Security Council could vote on a second resolution that would allow military action against Iraq for failing to comply with UN demands to disarm.

"The Iraq question is very hard to call. We all have the scenario of what happened 10 years ago, but the economy is in a totally different state to when Iraq invaded Kuwait," said Lex Werkheim, a fund manager at Eureffect in Amsterdam.

"We're in a very slow growth environment, so if war breaks out my call is that we will jump at first and then go down again until the pain is removed from this market once and for all."

French information technology consultant Cap Gemini was among the day's biggest gainers, jumping 16.1 per cent after its annual results confirmed that drastic restructuring measures had put the firm on the road to recovery.

The stock led a broad rally in technology stocks that helped the DJ Stoxx technology index rise 2.9 per cent.

Among other gainers in the sector, French telecoms equipment maker Alcatel added six per cent, Finnish mobile phone giant Nokia added three per cent, and French software company Dassault Systems jumped 5.6 per cent.

Elsewhere, British engineering firm Invensys vaulted 16.4 per cent on speculation that a rival firm could launch a bid to break up the company as it fights to cope with falling sales.

Banks were also upbeat, led by Germany's second-biggest lender HVB after Bundesbank chief Ernst Welteke said the bank had no solvency or liquidity problems. The stock leapt 7.3 per cent.

ABB was among the big winners, vaulting 10.2 per cent as investors put the company's grim results on Thursday behind them and looked to brighter prospects.

"ABB has cleaned house by settling its asbestos problems, and the worst is now behind the company," BNP Paribas said in a research note. It rates the stock "outperform".

In New York, the Dow Jones industrial average rose 0.6 per cent, and the tech-laced Nasdaq Composite index jumped 1.2 per cent in the wake of bullish economic data.

The Chicago purchasing managers index - a key curtain raiser to Monday's influential Institute of Supply Management manufacturing index - slipped to 54.9 in February from 56 in January, indicating that business activity in the US Midwest region grew for the fourth month running.

Meanwhile, the University of Michigan consumer sentiment index fell to a nine-year low of 79.9 in February from 82.4 in January, which was not as bad as expected.

That followed earlier data showing the US economy grew by 1.4 per cent in the last three months of 2002, compared to a preliminary reading of 0.7 per cent and a consensus forecast of 1.0 per cent.

"If you look at what businesses are doing, they're seeing a very nice rise in output, order books are filling up quite aggressively, and the signals from these numbers are looking fine," said Matthew Wickens, global economist at ABN Amro.

"The US economy is emerging from its soft spot quite nicely," he said, but added that enthusiasm in the stock market in response to the numbers was tempered by worries about a looming conflict in the Gulf.