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European markets hold onto gains
LONDON, England (CNN) -- European markets held on to most of their gains on Wednesday, supported by a better-than-expected survey of German business sentiment and a strong start on Wall Street. The Ifo economic institute's monthly index -- based on a survey of 7,000 companies -- fell for the fourth straight month in September, but business leaders said they saw a glimmer of hope for a recovery in Europe's biggest economy. Financial markets, which had expected a far worse reading on German sentiment, surged higher after the release of the Ifo -- wiping out earlier losses following a big decline in global bourses on Tuesday due to concerns over corporate profit and about a possible war in Iraq. Cautious comments on the U.S. economy from the Federal Reserve on Tuesday also bruised stocks. But after falling to fresh five-year lows on Wednesday morning, European markets jumped between 2 percent and almost 4 percent at one point in the session before finishing slightly higher. London's FTSE 100 gained 0.7 percent to 3,696.2 and the CAC 40 blue chip index in Paris rose 1.6 percent to 2,785.38, while Frankfurt's electronically traded Xetra Dax was up 0.3 percent to 2,883.12 in late trading (the German market was set to close at 1800 GMT). The pan-European FTSE Eurotop 300, a broader index of the region's largest stocks, rose 1.3 percent -- with the information technology and life assurance sub-sectors among the top gainers. On Tuesday, the European blue chip benchmark sank to its weakest close since April 1997. The AEX index in Amsterdam gained 2.1 percent and Milan's MIB30 index added 1.4 percent, while the SMI in Zurich rose 1.7 percent. Some market observers saw the quick upturn in stocks as an indication that short-sellers -- traders who sell borrowed stocks in the hopes that prices will fall, allowing them to make a profit by repurchasing them at a cheaper level -- had been buying back into the market. "The market was expecting something even worse and we can see that reflected in the market, which is really flying," one Frankfurt trader told Reuters. "It's case of short-covering and this will probably turn out to be a short-term reaction as there are still lots of fears about the German economy out there."
Anglo-Swedish drug group AstraZeneca (AZN) rose 5.3 percent to 1,894 pence after it won an advisory panel's support for U.S. approval of the drug Iressa, a pill that may become the first of a new type of cancer medicine to reach the U.S. market. (Full story) French telecom equipment maker Alcatel (PCGE) jumped 11.4 percent to 2.63 euros after announcing the sale of a 6.1 percent stake in French defence electronics firm Thales as Alcatel looks to cut its debt pile. Thales fell 9.1 percent to 30 euros. Vivendi Universal (PCGE), Europe's biggest media company, rose 2 percent to 12.21 euros after it announced a shake-up of its board and said it would sell assets worth 12 billion euros over the next 18 months. (Full story) In the U.S. on Wednesday, stocks swung higher at midday after unwinding an earlier advance, with market observers saying they see little buying conviction despite profit affirmations from conglomerate General Electric and some tech companies. At 1600 GMT, the Dow Jones industrial average rose 56.95 to 7,740.08; it was up as much as 123 points early in the session, but ventured into negative territory before recovering. The Nasdaq composite gained 12.86 to 1,195.03 and the Standard & Poor's 500 index added 6.47 to 825.76.
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