Europe stock markets surge
LONDON, England (Reuters) -- European stocks chalked up some of their biggest one-day gains of the year on Tuesday, shrugging off an early sharp fall to surge higher as buyers stampeded back to Wall Street amid hopes of a cut in interest rates.
Opinions were divided on the specific reasons for the rally.
Some cited hopes that when the Federal Reserve meets next week it will lower the cost of money in a bid to stave off a return to recession in the United States, while others said big programme trades were driving the market.
Some said it was due to short-covering by hedge funds or simply put it down to yet another sharp change of sentiment in equity markets which have been yanked to and fro in recent weeks -- often for no apparent reason.
"There are no stock-specific factors to explain the rise, but there are signs that some big institutions are taking profits on bonds and buying back into equities," said Kevin Gardiner, European strategist at Credit Suisse First Boston.
"The market fell off sharply yesterday in the absence of much news, so perhaps people feel it's time to dip their toes back into the water."
By 1551 GMT, with only Frankfurt still officially trading, the FTSE Eurotop 300 index of pan-European blue chips was up 4.38 percent at 927.8 points -- a whopping 63 points clear of its intra-day low.
That marked the index's second biggest one-day gain of the year in percentage terms, behind the 5.9 percent gain on July 29.
The surge on the narrower DJ Euro Stoxx 50 index was even more spectacular, motoring 5.7 percent higher to 2,586.4 points.
Insurers lead the way
The insurance sector led the way, acting, as it has done for several weeks, as a barometer of the market's overall performance.
The sector's exposure to the vagaries of the stock market has been thrown into sharp relief recently and whenever share prices rise, the insurers tend to benefit.
Reinsurers were the flavour of the day -- Swiss Re and Munich Re jumped more than nine percent each as investors viewed them as a safer bet than the primary insurers.
But France's Axa also rode the updraft, helping the DJ Stoxx insurance index soar 5.78 percent.
Technology stocks roared higher, inspired by a 4.49 percent rise in the U.S. Nasdaq Composite in the first two hours of New York trade.
Europe's largest chipmaker STMicroelectronics jumped 7.8 percent while a 6.6 percent rise in Siemens stock helped Germany's benchmark DAX index leap a massive 6.09 percent.
"The fundamentals haven't changed. I didn't understand the sharp downswing we saw yesterday and I don't really understand the correction today," said one European equity trader at a German bank.
"It's been driven by a lot of hectic people. It's not really to do with any specific corporate news."
U.S. Internet gear maker Cisco Systems Inc. is due to report after New York closes and is likely to drive tech sentiment on Thursday, when Royal Bank of Scotland, Scandinavian airline SAS and Swiss agrochemicals company Syngenta are due to report.
Novo Nordisk soars
Danish healthcare firm Novo Nordisk was the biggest riser on the Eurotop 300, surging as much as 18 percent after it beat expectations with its first-half earnings and affirmed its outlook for the full year.
And shares in Dutch temporary employment group Randstad jumped 15.8 percent after it posted far better than expected second-quarter results on Tuesday and an upbeat forecast for the third quarter.
Otherwise, most of the price rises were driven by bargain-hunters.
"We still believe that valuations are way below fair value." CSFB's Gardiner said.
As most of Europe's bourses closed, Wall Street indices were off their early highs but were still clearly ahead.
The Dow Jones industrial average was 3.87 percent higher while the broader Standard & Poor's 500 Index jumped 3.86 percent.
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