European stocks claw back losses in volatile trading

European stocks suffered another turbulent session, see-sawing wildly as they clawed back early losses following a revival in Wall Street's fortunes. Soothing words about the US economy from Federal Reserve chairman Mr Alan Greenspan and a trickle of upbeat earnings helped calm frayed nerves.

But analysts were sceptical the recovery would last, warning that stocks would remain weighed down by a number of issues, ranging from the integrity of corporate America to the impact of a rapidly weakening dollar.

In his twice-yearly monetary policy testimony to Congress, Mr Greenspan praised the resilience of the US economy but warned that wounds from corporate scandals and a stock market rout would take time to heal.

"The one overriding factor is this confidence in the integrity of financial reports and I don't know how you rebuild that.

"My feeling is it's going to be time that will heal that," said one fund manager.

In New York, the Nasdaq closed at 1375.27, a fall of 0.53 per cent. Blue-chip stocks did not fare well as the Dow Jones index closed at 8473.1, down 166.08. Mr Greenspan's comments boosted both indices but the recovery faltered in the last hour.

The chairman's comments also helped to steady the weakened dollar. The euro was trading at around $1.0083 in their wake, having earlier hit a session high of $1.0147, its highest level since January, 2000.

The Irish stock market fluctuated like its counterparts overseas. After losing nearly 2 per cent in morning trading, it clawed back lost ground in the afternoon to close 0.7 per cent lower at 4,313.

It was bolstered by the two leading banking stocks, AIB and Bank of Ireland, both of which moved into positive territory.

In London, the FTSE closed higher for the first time in seven sessions, having earlier touched a six-year intraday low.

Telecoms shares ended on a strong note with Vodafone and O2 both up more than 6 per cent as they were buoyed by news that Nextel Communications, the number five US mobile company, turned profitable in the second quarter.

"It's been a bit hair-raising today but I don't think we're out of the woods yet. It will take more than one steadier day for confidence to come back. The market has not got the stomach for any more corporate accounting shocks," said one trader.

Meanwhile, German shares jumped 1.2 per cent, while the French market closed just 0.1 per cent lower, although dollar-sensitive stocks such as oil shares remained a drag on the market.

-(Additional reporting by Reuters)