European shares rose in early trade today as cash return hopes boosted DaimlerChrysler and higher commodity prices lifted oil and mining stocks, taking the focus away temporarily from credit worries.
At 8.19am, the FTSEurofirst 300 index of top European shares was up 1.1 per cent at 1,498.4 points, with shares in the French benchmark outpacing British and German peers.
At 10am the Iseq was up a half a per cent at 8231 with the major banks marginally ahead, with the exception of Irish Life and Permanent shares which were down 12 cent at €17.88.
German carmaker DaimlerChrysler was the top positive weight on the FTSEurofirst 300, gaining 3 per cent after a newspaper reported that it was set to outline how it plans to return cash to shareholders, sparking dividend and buyback talk.
European shares are up 0.8 per cent on the year, having fallen 8.4 per cent from a 6-1/2 year peak hit on July 13th as investors worried about the impact on credit markets of a crisis in the subprime, or risky, segment of the US mortgage market.
But the pan-European FTSEurofirst is now on track for its fourth successive up day after eking out a tiny gain yesterday.
"I think the correlation between equity and credit markets is unjustified as prospects for the global economy and corporate profitability are not under threat," said Alain Bokobza, head of strategy at Societe Generale in Paris.
"Equities have the capability to rebound, and my case is for them to regain ground by year-end but in a more volatile environment than we've had for a few years."
The Federal Reserve bolstered the financial system last week by cutting its discount rate, the rate at which banks borrow directly from it.
Fed chairman Ben Bernanke said today that the bank would use "all available tools" to calm financial markets, but the president of the Federal Reserve Bank of Richmond, Jeffrey Lacker, said that a change in rates would be warranted only if it affected the outlook for growth or inflation.