Iraq news propel eurostocks to near four-month highs

European shares rose for a fifth straight day and were set for their highest close in nearly four months yesterday, as weekend advances by US-led forces spurred investors into thinking the war in Iraq might be nearing an end.

"A lot of liquidity will be going into the market if the newsflow continues to show this and oil prices keep falling," said Ian Richards, European equity strategist at ING Barings.

"An expected spurt of economic growth and falling risk aversion will be the catalysts."

Volatile insurance stocks such as Germany's Allianz and Dutch giant ING led the climbers, along with leading auto and technology stocks.

European aircraft maker EADS also jumped sharply along with holiday and airline stocks like TUI and British Airways as fears eased about a protracted slump in tourism due to the war.

Gains were very broad-based, with rising stocks outpacing decliners by around 12 to one.

By 1545 GMT, with only Frankfurt still officially open, the FTSE Eurotop 300 index of pan-European blue chips was up 3.4 per cent and the eurozone DJ Euro Stoxx 50 index was up 3.9 per cent.

The gains added around €130 billion to the value of Europe's 300 leading companies, and left the Eurotop 300 benchmark on course for its highest close since mid-January.

Among the national benchmarks, the French Cac-40 closed up 3.44 per cent, the British FTSE 100 ended 3.18 per cent higher, and the Swiss Market index closed up 2.38 per cent.

Dealing volumes started strongly but tapered off in late trade, as investors cashed in some of their profits and gains were pared slightly.

Elsewhere, French utility Suez gained 9.3 per cent after Standard & Poor's removed the company's long-term ratings from CreditWatch and investors bet the utilities giant would deliver on its promise to reduce financial debt.

Shares in Sweden's Securitas leapt 9.9 per cent after the world's biggest security services company reassured investors that its underlying first-quarter sales growth in the United States was around two per cent, as expected.

US troops punched into the heart of Baghdad, storming two of Saddam Hussein's palaces, despite fierce Iraqi resistance, while British troops walked unopposed into the heart of the Iraq's second city Basra.

But while some of the fog of war may be clearing, visibility remains poor for investors on several counts, strategists are saying.

The extent to which an end to the war will boost a frail global economy remains unclear, even though recent weak data is distorted by geopolitical factors as firms put off investment and worried consumers rein in spending, according to economists.

Investors are also braced for a tricky first quarter results season in April/May, and are not holding their breath that firms will give an upbeat assessment of their future profit prospects, due to ongoing pressures to pay down corporate debt and reconstruct their balance sheets.