US markets staged a late rally to end in positive territory after falling more that 150 points midway through a volatile session.
The recovery came too late for European markets which suffered falls of up to 4.5 per cent as a weak opening in New York compounded earlier losses on the back of poor corporate news, especially in Germany where Hypovreinsbank suffered its first net quarterly loss.
The pan-euro zone Euro Stoxx 50 index fell 4.30 per cent to 2,399.77 points, outstripped by Germany's DAX, which was down 4.45 per cent at 3,015.42 points. France's CAC 40 was the next biggest loser among the main European indexes, closing down 4.13 per cent at 2,992.23 points.
By those standards, the Irish market fared well, giving up only 0.58 per cent on the day to remain above the 4,000 level at 4,055.34. Traders said the market was reflecting some profit-taking after the rally of recent weeks.
"It's simply a case of a market that rose too far, too fast," said one. In London, the FTSE was down 2.72 per cent at 4,006.90 as banks, chemicals and oils all took a hit.
Early worries about the economy following news that three of the Bank of England's monetary policy committee voted for lower rates at its last meeting was followed by earning from chemicals giant GlaxoSMithKline, which disappointed.
A downbeat report from Standard & Poor's on the state of the British insurance market also hit sentiment, espcially in Royal & Sun Alliance where S&P warned it might cut the ratings.
The US markets spent most of the day in negative territory, with the Dow blue-chip index losing as much as 150 points, before pulling ahead in the final hour. The Dow finished up 0.52 per cent or 44.11 points at 8,494.27, a fraction off its high for the session.
The Nasdaq closed ahead 2.12 per cent at 1,320.23, with the Standard & Poor's 500 climbing 5.97 to 896.14.
Dealers said the choppy trading over the last two sessions reflected conflicting currents of thought on the state of the US economy.
"The struggle is, on the one hand, between investors who think economists are right, that the economy and earnings are going to expand through 2003 and under those conditions stocks are cheap ... And there's another group that doesn't believe the economy is going to expand through 2003," said Mr Hugh Johnson, chief investment officer at First Albany.
Technology stocks propelled the US market higher as investors scooped up shares battered by a bleak forecast from Texas Instruments Inc on Tuesday.
"You can't sell the stocks. Every time they get down 100 to 150 points, they start buying them again," said Mr Michael Murphy, head of equity trading at Wachovia Securities.
- (Additional reporting by Reuters)
