Sentiment recovers as euro stalls against dollar

Markets rallied as the euro fell against the dollar, undermined by comments from Mr Ernst Welteke, president-designate of the Bundesbank. Mr Welteke warned that a strong euro could damage exporters in the single currency area.

The Eurobloc 100 index of euro-zone shares climbed 2.84 or 0.3 per cent to 1,057.69. The Eurotop indices of leading shares inside and outside the zone gained more sharply, with the 100 index rising 29.07 or 1 per cent to 2,922.14 and the 300 index closing 11.69 or 0.9 per cent higher at 1,274.35.

Frankfurt called a halt to five sessions of declines as investors sought cheaper stocks. The Xetra Dax index, which had fallen 7.4 per cent since Monday of last week, recouped 17.72 to close at 5,224.16.

HypoVereinsbank closed a volatile session €1.60 lower at €56 after it posted a lower-than-expected 14.3 per cent rise in first-half operating profit. The shares, which traded as high as €68.50 on July 16th, rose to a day's high of €59.98 early in the session. Elsewhere in the sector, Deutsche Bank put on €1.08 to €60.66, Dresdner climbed 74 cents to €41.05 and Commerzbank 59 cents to €32.49.

Paris ended a run of seven successive declines as banks recovered from Monday's sell-off. The CAC-40 index closed at 4,426.12, up 24.54 or 0.6 per cent. The three big banks involved in a complex take-over battle all rallied after suffering falls of more than 4 per cent in the previous session. Banque Nationale de Paris has made hostile bids for both Societe Generale and Paribas in an attempt to prevent them merging.

BNP rose €1.55 or 2.2 per cent to €72.65 on a growing belief that its strategy might carry the day. Its targets also rallied strongly, with ESocGen rising €6.20 or 4.1 per cent to €158.20 and EParibas finishing €3 or 3.1 per cent up at €99.50.

Amsterdam ended higher after New York opened firm and as bargain hunters stepped back into the market. The AEX index ended 2.88 up at 551.43.

Household products group Benckiser stood out, rising 3.1 at 54.60 on news of a tie-up with Reckitt & Colman which could create the world's biggest household cleaning products group. The stock touched a high of €58 earlier.

Milan saw its best early levels eroded. The Mibtel index finished 104 firmer at 23,443, off a high of 23,607. Autogrill, the catering company, ended up 3.6 per cent at €10.04 as the market warmed to the group's $529 million friendly bid for Host Marriot Services of the US. Fiat ended up 1.9 per cent at €3.27 ahead of results after the market closed.