Relief over profits boosts US shares

Leading US and European shares have recovered some ground lost in recent days, as relief over corporate earnings overcame disappointment at economic data.

In the US, the benchmark Dow Jones industrial average closed 158 points higher, with the Nasdaq rebounding strongly from a six-year low hit on Tuesday.

Market close

New York: Dow
+2.1%

New York: Nasdaq
+3.4%

Frankfurt: Dax
+3.1%

London: FTSE
+0.7%

Paris: Cac
+1.6%

Tokyo: Nikkei
-1.7%

The increases followed more modest rallies in Europe, and a fall in Tokyo stocks, as sentiment continued to be undermined by Middle East tensions.

"The Iraq problem continues to command the market's attention," said Hiroichi Nishi at Nikko Cordial Securities in Tokyo.

A downgrade by the International Monetary Fund of world economic growth forecasts also dampened investors eagerness to take advantage of cheap share prices.

"People are sitting on the sidelines, waiting for a reason to buy. It takes one gloomy report to chase any buyer away," said a broker in Basel.

London, Paris and Frankfurt stocks closed well below day highs.

Profits relief

Some observers said Wednesday's share bounces reflected more technical factors than actual investor confidence.

"The market does not go down every day, every week, forever and ever - sometimes people lift up their heads," said Larry Wachtel, a market analyst at Prudential Securities.

Steven Goldman, chief market strategist at Weeden in Greenwich, Connecticut, said: "The markets coming in today were considered somewhat oversold, so you had a reflex rally."

But observers also credited a series of upbeat reports from US companies for easing gloom over corporate profits.

"A lot of companies are now stating they were affirming forecasts and that led to a little reprieve," Mr Goldman added.

Conglomerate General Electric was among firms saying earnings were on track to meet forecasts.

"Today's gains were initially started by GE's positive comments and the fact that, on a technical basis, we're extremely, extremely oversold," said Tom Schrader at Legg Mason Wood Walker.

"If you're a value player, you've got to be wondering if this isn't the time to pick up good stocks at discounted prices."