European shares rose for the fifth day in a row as hopes grew of a swift and decisive war in Iraq. A fall in oil prices and strong performances from individual stocks such as French drinks group Pernod Ricard and German car-maker BMW also helped Europe's leading stock markets to end on a better note.

However, the performance on Wall Street was more subdued as the Dow Jones index of leading shares turned in a flat performance to close 8,265.45, up 71.22 while the technology-oriented Nasdaq ended down 3.47 at 1,397.08 per cent.

"People are taking a wait-and-see attitude," said one New York dealer. "The deck is stacked in the \ allies' favour, but you still never know exactly what you are getting into until you get there. People are waiting to see how it all unfolds."

In London, British shares hit a two-month high, despite a 10 per cent drop in food retailer Safeway after a takeover bid from rival William Morrison was surprisingly referred to the regulators.

In France, shares closed 1.5 per cent higher, helped by a strong performance from Pernod Ricard which turned in better-than-expected results for 2002. German shares also finished up on foot of strong performances from insurance group Allianz and car-maker BMW which said it aimed for steady profits this year despite the heavy cost of its biggest ever new model launch programme.

In Dublin, the market closed 0.65 per cent higher although dealers said it had been quiet with volumes confined to the leading stocks.

"People are trading very cautiously and they're all looking at Sky News," one dealer said.

Ryanair was the most active stock on the day, shedding around 2.5 per cent as airline shares were hit by fears that their credit ratings may be cut because war would weigh on demand.

The low-cost carrier was not included in the warnings from ratings agency Standard & Poor's but was hit by the more bearish sentiment towards the sector.

However, despite yesterday's strong performance in Europe, stockbrokers said it was vital that investors' hopes of a quick end to the Iraqi uncertainty were fulfilled if markets were to continue to make progress.

"It is now of the utmost importance that the resolution of impending conflict be as speedy and as uncomplicated as equity markets require," NCB Stockbrokers noted yesterday.

Meanwhile, the dollar rose to its highest levels in a month against the yen and also advanced versus the euro, closing at $1.05 in Dublin yesterday.

Undaunted by Saddam Hussein's defiant stance, traders continued to buy dollars, encouraged by the lifting of uncertainty that plagued markets in recent months.

"For the longest time, the war trade had been built into the market. Now that the actual strike seems to be coming to fruition, the trade is being unwound to a certain degree," said one currency analyst. "This is a relief trade but to say that the dollar has reversed course on a longer term basis would be a little bit presumptuous," he added. - (Additional reporting by Reuters)