European stock markets responded enthusiastically to the surprise interest rate cut by the US Federal Reserve and the accompanying surge on the US stock markets.
However, worries in the US over unemployment figures, due out today, and confirmation from other indicators of a growing weakness in the US economy undermined the dollar and saw the euro surge from below $0.93 to top $0.95 before closing in New York last night.
Share prices in Europe bounded ahead on the back of the extraordinary 14 per cent jump in the Nasdaq Composite index following the Fed's announcement.
But US markets failed last night to hold onto all those gains with the Nasdaq 1.92 per cent weaker at 2,566.57 and the Dow Jones giving up 0.3 per cent to 10,912.41.
Markets had expected the Fed to wait until its scheduled meeting later this month to cut rates. The Fed announcement came after European markets had closed on Wednesday but prices surged ahead from the opening bell in most markets yesterday. Not surprisingly, given the scale of the jump in the Nasdaq, European technology shares experienced a surge of buying interest.
The Dow Jones Stoxx technology index jumped 9 per cent from Wednesday's 13-month lows. London's Techmark index jumped almost 5 per cent.
Shares in top mobile phone firms Ericsson and Nokia headed the list of Europe's most wanted blue-chips, jumping 12 per cent. Telecom equipment makers Alcatel and Britain's Marconi were also big gainers, up 12.5 per cent and 7.9 per cent respectively.
British giant Vodafone - whose take-over of Eircell is proceeding - saw its shares jump more than 6 per cent to 239p sterling. This is good news for shareholders in Eircom who will receive Vodafone shares for Eircell if the takeover is completed. Eircom itself was eight cents higher on €2.55.
Analysts noted the sector was a good defensive tech play, given lingering uncertainty over the continuing impact of an economic slowdown on often highly leveraged technology firms.
Wednesday's 3 per cent recovery by the Dow might seem insignificant against the 14 per cent rise in the Nasdaq but it still led to strong demand for "old economy" shares, with the FTSE 100 index up 2.4 per cent. In Dublin, the Irish stock market closed 1.1 per cent higher on the day.
Telecoms in Europe advanced 6.1 per cent as investors mulled the effect of the Fed's rate cut on carriers' debt burdens, racked up in order to pay for new generation mobile phone licences and networks.
"The Fed's move is only the beginning; Alan Greenspan has said he intends to extend the move and maybe we'll get a full percentage point before March," said one analyst.
"For the telecom companies with large loans outstanding, that's very important. If they can save 1 per cent on their interest payments, that's a huge amount in some cases. Many European telcos also have dollar loans outstanding so it's a nice advantage for the sector."
As technology shares rose, investors switched out of last year's winners - healthcare and food stocks. The healthcare sector was off almost 5 per cent, while in food and drinks Diageo was down more than 6 per cent and Nestle - the world's biggest food company - was down more than 5 per cent.
