Stock markets around the world steadied yesterday after Monday's heavy falls but investors remained nervous amid continued concern about war in the Gulf and rising oil prices.
Many investors also retreated to the sidelines ahead of US President George Bush's State of the Union speech late yesterday.
"I think the war is still taking centre stage," said Mr Edgar Peters, chief investment officer at PanAgora Asset Management in New York.
"People are still waiting to see what happens with Iraq and that will dominate things for several weeks."
But a strong start on Wall Street encouraged European markets, most of which closed modestly higher. Dublin, however, proved an exception, remaining in negative territory.
The ISEQ closed nearly 15 points lower following a mixed performance among the leading stocks although dealers said trading was light. "People are nervous although happy to see calmer markets," one Dublin dealer said.
In London the FTSE 100 ended an 11-day losing streak to close nine points higher as a late surge in oil stocks lent support to the broader market.
French and German markets also finished higher, cheered by Wall Street's strong early performance following a better-than-expected reading on consumer confidence and positive outlook statements from corporate giants like Merck and Xerox.
In New York, the Dow Jones index of leading blue chip shares closed 99.35 points higher at 808.91, up 1.24 per cent while the technology-oriented Nasdaq gained 1.28 per cent to close at 1,342.19.
Analysts said despite the modest recovery, global markets remained nervous ahead of Mr Bush's keynote State of the Union address in which he was expected to try to brace Americans for possible war with Iraq and ease mounting worries about the struggling economy.
"I think for the moment earnings and economics have got pushed into second place... The obvious focus is going to be Iraq, with Bush's State of the Union address," said BNP Paribas strategist Mr David Thwaites.
He added that although stocks had been ripe for a technical bounce, it was doubtful whether share prices had hit the bottom of their most recent slide.
"Maybe it's a bottom short-term but at the moment I don't give much credence to this rebound," said Mr Thwaites. "Confidence is so low, sentiment is very negative - I think this is a bit of a technical bounce," he added.
On the foreign exchange market, the dollar battled back against other leading currencies, pushing the euro down to $1.0825 from $1.0850 late on Monday.- (Additional reporting by Reuters)
