European blue chips extended their gains yesterday afternoon as US stock index futures climbed and as tech stocks jumped after investors judged Nokia's recent trading update in a more positive light.
Volumes were subdued but those who were in the office looked to Wall Street for a feisty performance on the first anniversary of last year's attacks on the US.
By 1326 GMT, the FTSE Eurotop 300 index of pan-European blue chips was up 1.85 per cent at 957 points and the narrower DJ Euro Stoxx 50 index was 2.57 per cent higher at 2,708 points.
The dollar was slightly stronger against the euro and the yen, reinforcing feelings of patriotic fervour in the United States.
European equities are about 14 per cent above their five-year nadir hit on July 24 as investors sift through beaten down stocks for bargains.
There has been rising hope that the advance will continue once the anniversary of September 11 had passed although some strategists saw little scope for significantly extended gains.
"I don't see a wall of money coming in as the market needs to be cheaper before people will come in and buy stocks aggressively," said Michael O'Sullivan, a pan-European equities strategist at Commerzbank.
O'Sullivan said other factors likely to limit the upside in the short-term were US President George W. Bush's speech to the UN today at which he is expected to drum up support for an attack on Iraq, recent weak economic data as well as the prospect of forced selling by US mutual funds as they seek to crystallise tax losses ahead of this month's fiscal year-end.
Insurers remained under the cosh on fears the recent slide in equity prices will put pressure on solvency ratios and that this will force them to ask investors for money. However some analysts suggested the fall was overdone.
"Insurance firms may find they have to consider a rights issue to prevent a downgrade of its financial strength rating. However current share prices are far too cheap," said Frank Stoffel, WestLB Panmure European insurance analyst.
Legal & General, Zurich Financial and SCOR have all recently announced cash calls.
Shares in Aegon slumped seven per cent on fears it may be next in line. Aegon denied it had plans to issue new shares but said it was in talks aimed at changing its relationship with its major shareholder to gain financial flexibility and increase capital strength.
The DJ Stoxx tech index led the sectoral leaderboard with a gain of four per cent as investors focused on the positive aspects of Finnish Nokia's mid-quarter trading statement on Tuesday.
"Following yesterday's update brokers are rejigging their analysis of Nokia and considering the group in a more positive way," said fund manager Ollipekka Elovainio at Nordea Investment Management in Helsinki.
Also bolstering the stock was news that investment bank Morgan Stanley raised its 12-month price target to 13 euros and said it believes shorter-term momentum could take it to 16 euros or beyond.
Nokia, which is the world's largest mobile handset maker rose 5.9 per cent to 14.92 euros.
Sweden's Ericsson also bounced back after the stock tumbled on Tuesday, pressured by concerns over the outlook for mobile phone network equipment demand.
Shares in France Telecom were 1.2 per cent firmer after the Le Figaro newspaper reported that the company had decided to abandon its 28.5 per cent stake in debt-laden German partner MobilCom, with the support of the French government.
MobilCom's shares slumped 63.8 per cent.