Markets hold steady as fears of war retreat

Markets were firm across Europe yesterday as battered investor sentiment was lifted by receding fears of war in Iraq and Friday's rally on Wall Street.

Shares in Dublin lacked the strength of their European counterparts, but managed to close up modestly in quiet trade.

Dealers said investors wanted to believe the chances of war were dwindling but still seemed unwilling to put much money in play.

"The market tried to go better but without much conviction," said one trader. Bank of Ireland and CRH were among Dublin's strongest stocks.

Gains were more substantial in London, with the FTSE 100 climbing by 2.23 per cent to 3,692.4, the exchange's best close in 3½ weeks. Bradford & Bingley led banks higher ahead of today's results, while drug firms also performed well. But volumes were again low, reflecting the closure of the US markets for Presidents' Day.

"There's a feeling that the market is quite cheap and if this crisis with Iraq does resolve itself quickly then you could see the market have a very strong rally," said Mr Andrew Hobson, fund manager at Exeter Asset Management.

Elsewhere, dealers said the policy rift between the US and many European countries over Iraq had at least delayed the risk of military action, prompting both bargain-hunting and covering of speculative market positions after declines in previous weeks.

The DJ Euro Stoxx 50 index of leading euro-zone shares rose 1.91 per cent to 2,241.98 points, while the German DAX 30 index jumped 1.64 per cent to 2,718.34 points and the French CAC 40 index won 1.92 per cent to 2,882.12 points.

Although most European shares were broadly higher, some dealers did not expect the trend to continue. "I think the market was due for a rebound," said one trader in Paris. "But the dollar is the key thing for equities right now; we need to see a bit more strength, and we're probably not going to get it until this Iraq conflict is out of the way."

The euro edged lower from $1.0789 to $1.0736 yesterday ahead of an emergency summit on Iraq called by the EU's Greek presidency

Oil prices also fell, declining from two-year highs set last week.Sentiment weakened after an OPEC source said member countries were likely to suspend output quotas and pump at will if war halted Iraqi crude supplies.  (Additional reporting Reuters, AFP)