World shares bounce back

Can shares hold on to their gains this time?

World stocks rallied on Friday, lifted by a strong performance on Wall Street and a rare burst of positive corporate news.

London's benchmark FTSE 100 share index enjoyed its strongest day in almost three months, closing up was up over 4% or 176 points at 3,953.

In the US, the Dow Jones closed up over 4% or 300 points to 7,845, continuing Thursday's gains.

A round of upbeat company statements helped lift investors' moods, while economic data appeased concerns over weaker consumer sentiment.

Despite the rally, market watchers warned that next week would be difficult as the threat of an attack on Iraq grows.

Time for a turnaround?

The US gains were helped by a 10% lift in shares of the world's largest computer company, International Business Machines, after positive analysts comments.

Market watchers said the recent battering of stock markets could now be making way for some stability.

A lot of the negatives are starting to disappear

Owen Fitzpatrick, Deutsche Bank

Positive news from General Electric, which reported a 25% increase in sales for the last three months, also helped lead the markets out of the doldrums.

"General Electric is the bellwether of the market," said John Forelli at Independence Investment.

"If the company can lead us out of this, I think it will give investors some confidence," added Mr Forelli.

London cheers

In London, struggling television broadcasters Carlton and Granada cheered investors with news that their on-off merger talks had now reached the 'advanced' stage.

The prospect of a merger between the two firms lifted sentiment in a market starved of big corporate deals.

"This is just the kind of (mergers and acquisitions) news the market needs," a trader in London said.

European lift

In Frankfurt, the Dax index closed a mighty 7% higher at 2930, following a string of positive company news.

Traders reacted positively to suggestions from German airline Lufthansa that the firm's current operating profits forecast was 'conservative.'

The market isn't going to rise particularly far while a war with Iraq is on the cards

Richard Prvulovich, Gartmore Investment Management

There was also good news from car maker Porsche, whose shares leapt over 50% on very strong annual results and a healthy outlook.

France was also helped by news that the French government may invest more money in ailing telephone firm France Telecom.

The Cac index closed up 5% at 2902, as dealers said investors were looking for bargains after the recent falls.

Short-lived respite?

Friday's gains provided some welcome relief, after a steady run of gloomy news had brought markets down to five-year lows.

However, analysts warned that the optimism could be short-lived following news that US president Bush had won support for a possible attack on Iraq.

"The market isn't going to rise particularly far while a war with Iraq is on the cards," said Richard Prvulovich, senior equities investor at Gartmore Investment Management.

Next week will also see another round of closely-watched corporate updates, including the life assurer Prudential and home shopping group N Brown.