US and European stock markets

Dow Jones 10,141.83 +3% Nasdaq 1,69.27 +7.8% London FTSE 100 5,209.1 +1.7% Frankfurt Dax 5,028.59 + 2.89% Paris Cac 4,404.03 +2.5%

The Dow Jones index of blue-chip shares rallied in sympathy, settling more than 3% up on the day at 10,141.83.

It was the Nasdaq's biggest one-day rally in over a year, fully recouping hefty losses incurred earlier this week.

Europe gains

Wall Street's strong performance supported the main European stock markets on Wednesday, which had also closed in positive territory.

London's FTSE 100 index posted its biggest one-day rise in over four months, closing 1.7% higher at 5,209.1.

And in Frankfurt, the DAX settled nearly 3% higher at 5,028.59, while the Paris Cac index added 2.5% to close at 4,404.03.

The markets' bullish performance has come as a welcome respite from a protracted downwards trend.

Fragile recovery

The Dow had performed strongly during the first three months of the year amid signs of a strong economic recovery in the US, making up all of the ground lost after the 11 September attacks.

But a slew of lacklustre corporate sales forecasts from blue-chip companies halted the index's steady rise two weeks ago.

Nothing fundamental has changed in corporate America, and I don't think this is a turnaround

Jack Francis, UBS Warburg

The Dow fell below 10,000 for the first time in nearly two months on 26 April, and it has struggled to hold onto gains since then.

Fears that initial forecasts of a quick economic rebound may have been over-optimistic put share values under added pressure.

The Nasdaq index of technology stocks, which fell 2% on Monday alone, has also faltered in recent weeks.

High levels of corporate debt and persistently sluggish demand have sapped confidence in tech sector firms' ability to deliver strong earnings growth in the months ahead.

Caution urged

But analysts warned that Wednesday's rally, triggered primarily by Cisco's better-than-expected results, may turn out to be short-lived.

"This is just a snapback rally. Nothing fundamental has changed in corporate America, and I don't think this is a turnaround," said Jack Francis, managing director at UBS Warburg.

The outlook for the wider US economy remains uncertain, with consumer spending showing signs of waning and business investment still weak.

Rise and fall

The Dow hit an all-time high of about 11,700 in January 2000 before falling steeply as the bull market of the late 1990s, fuelled largely by a sharp rise in technology stocks, ran out of steam.

It first breached the 10,000 level as the tech boom was getting into its stride in March 1999.

This threshold has been seen as a psychologically important level ever since, with a dip below 10,000 likely to dent investor confidence.

The Nasdaq's high watermark of about 5,000 came in March 2000, but then slumped as the tech bubble deflated.