Eurostocks recover modestly, ABB jumps, Iraq eyed

European bourses recovered yesterday as investors scooped up battered shares after Tuesday's rout, but the movement of US tanks to the Middle East served as a reminder that investors still face a rough ride.

On a bright note, ABB shares jumped 13.6 per cent after the Swiss-Swedish group said it would sell most of its leasing and financing business for $2.3 billion in cash, allowing ABB to slash its $5.2 billion debt mountain.

Advancing issues barely outpaced decliners as the market struggled at times to hold its gains with cautious investors still doubting that an economic recovery will be strong enough to revive profits significantly.

The worry of a possible US attack on Iraq also weighed. "There were big moves in equities yesterday and I think we are going to get up and down days going forward just like that," said Chris Johns, global strategist at ABN AMRO bank.

"But this has not changed my mind that we are bottoming in equities, though this does not mean there will be a big bounce. Issues like Iraq and double-dip recession are not going to be sorted out very quickly," Johns said.

By 1530 GMT, with only Frankfurt still officially trading, the FTSE Eurotop 300 index was up 0.6 per cent at 905 points after tumbling four per cent to a four-week low on Tuesday. The index has given up nearly half of its 20 per cent rally from a five-year intraday low on July 24.

The Euro Stoxx 50 index gained 1.1 per cent to 2,538 points. Europe's hypermarket leader Carrefour surged 4.3 per cent on news that French hypermarket sales rose five per cent last month from a year ago.

Oil leader BP sank four per cent after stunning the market by cutting its 2002 oil and gas output target due to operational problems and other factors, news that hit shares in rivals too.

The pullback in oil sector shares came despite a big jump in crude oil prices as plans emerged for the United States to ship tanks and heavy armour to the oil producing Middle East region this month.

President George W. Bush said he would make his case against Iraq at the United Nations on September 12, a day after the first anniversary of the attacks on the United States, itself a cause of jitters for many in the market.

"Although an attack on Iraq has been talked about for a while, it has not yet been factored into the market," said Matthew Leeman, a portfolio manager at Lombard Odier.

Europe's bounce was kept intact by a similar move on Wall Street, where the Dow Jones industrial average was up 0.5 per cent at 8,353 points as bourses shut.

The tech-studded Nasdaq Composite rose 0.8 per cent.

Shares in food giant Nestle rose 2.6 per cent as investors bet a US court would intervene in the sale of Hershey Foods, reducing the odds that Nestle would overpay for the US chocolate icon.

British tobacco group Gallaher rose six per cent to a record high after it signed a deal to operate in China, the world's biggest cigarette market, as it beat expectations with a 23 per cent rise in half-year underlying profit.

But in the negative column, UK IT services group Logica sank 16 per cent to a six-year low after its annual profit fell by a third and warned the outlook for its key businesses was tough.

British electricity generator International Power fell 13.3 per cent after it forecast a sharper-than-expected net earnings fall for next year.

French insurer Scor shed 12.5 per cent after posting a sharp fall in first half profit due to a drop in the value of its equity holdings, making it the latest to be hit by the long bear market.

Rival Zurich Financial, which reports today amid expectations of a mammoth $2.5 billion rights issue announcement to put its finances on an even keel, fell four per cent.

The European earnings season continues today when the world's biggest spirits group Diageo reports, along with French retailer, Pinault-Printemps-Redoute.

The technology sector will also wait for a market update from global chip bellwether Intel Corp. after Thursday's New York close, though analysts have already begun to trim their earnings estimates for the company.

Investors will also look to today's US second quarter productivity, jobless claims, and factory orders numbers for reassurance on the economy.

But fund managers said the market was essentially stuck in a groove until later this month and October when US companies announce adjustments to their third quarter numbers, and then report quarterly earnings and give their outlooks.

"I still believe the picture will be more rosy, and year-on-year comparisons will be that much easier," said Lombard Odier's Leeman.