Hopes that the war in Iraq was nearing its end pushed stock markets ahead in both Europe and the US yesterday, while the dollar marked a fifth successive day of gains against the euro.
Stocks on Wall Street opened strongly but gains had eased to about 2 per cent by midday. The Dow Jones closed up 0.26 per cent higher last night.
In Europe, as most markets moved towards closing at a three-month high, Irish shares were once again sheltered from most of the gains as the Dublin market closed up just slightly more than 1 per cent.
Dealers reported renewed appetite from buyers who had chosen to sit out the war but said they were cautious on the ability of the market to sustain the latest rally.
"The markets have been so focused on what's going on militarily that they have discounted a lot of bad economic news," said one Dublin dealer. "They may now start to focus on underlying economic numbers and earnings growth potential," he added.
In London, the FTSE 100 Index reached its highest close since January 15th as it gained 121.4 points.
The FTSE Eurotop 300 index was up 3.4 per cent last night. Since hitting a six-year low on March 12th, the pan-European index has racked up a gain of about 22 per cent.
The narrower DJ Euro Stoxx 50 jumped 3.9 per cent, while other major European indices racked up gains as high as 5.6 per cent.
"This rally was entirely to be expected given the reduction in the risk premium associated with the war," said Mr Andy Hartwill, global strategist at SG Securities.
"However, we are not out of the woods yet and trading will be volatile and liable to setbacks, given the weak if not downright gloomy economic outlook for the euro zone."
The dollar also forged ahead yesterday but investors pared its gains after seeing it rise to a three-month high against the Swiss franc.
The euro fell for the fifth consecutive session, hitting a two-week low of $1.0560 before climbing back to $1.0624, still a loss of 0.98 per cent from Friday's New York close.
Against the Swiss franc, the US currency hit a high of 1.4080 francs before easing back to 1.3976 francs.
"The dollar rallied in Asian and European trade based on the positive war news and is now coming off because the market got a little ahead of itself," said Mr John McCarthy, director of foreign exchange at ING Capital Markets in New York.
Across the world, investors dumped safe-haven investments such as gold and bonds.
"For many weeks, fears of a long war hit stocks worldwide, and with the sudden US move overnight that may indicate a short war, and the market rallied sharply," said Mr Alan Ackerman,chief market strategist at Fahnestock & Co.
"What fuelled the [Wall Street\] rally initially was significant strength in European markets," he said.
Oil prices limited heavy early losses after OPEC proposed an emergency meeting to discuss output cuts following the substantial US military gains in Iraq.
London Brent crude was off three cents at $24.65 a barrel. Earlier it slumped to $23.40, a four-month low, on news of US raids into central Baghdad.
US crude eased 28 cents to $28.33 a barrel.
Gold also tumbled, shedding its safe-haven premium.
