European shares turned in a mixed performance yesterday as nagging worries about the stuttering economy and the looming corporate earnings season were offset by television images of US troops being welcomed into the heart of Baghdad.

After three weeks of fighting, US-led troops were greeted in central Baghdad by jubilant Iraqi crowds, and financial markets took the capture of the capital city as a sign that President Saddam Hussein's rule was crumbling.

Traders were transfixed by live television images showing Iraqis tying a noose around a huge statue of Saddam in central Baghdad, and being helped by US troops to pull the statue down.

"The images are incredible. The phone hasn't rung for about 40 minutes," said one London-based pan-European share trader.

"The feeling in the market is that the war is over. We thought this was going to be two, three or four weeks in the future, not right now," the trader said.

But caution later returned to the markets as investor relief that the cloud of war may be lifting faded into concern about the state of the global economy and the health of corporate profits.

"The focus has switched back to fundamentals," one Dublin dealer said. "With the first-quarter earnings season kicking off in the US next week, markets are nervous."

Events unfolding in Iraq helped the pan-European FTSE Eurotop index rise more than 1 per cent higher during the day.

But other markets managed a more modest performance with Irish shares up just 0.5 per cent while their British counterparts lost 0.2 per cent.

In the US, the stock market enjoyed an early rally but this later fizzled out as attention turned back to the economy and earnings. The Dow Jones index of leading blue-chip shares lost 1.22 per cent, while the Nasdaq closed 1.89 per cent lower. - (Additional reporting, Reuters)