The leading US markets managed to hold to gains for the second week in a row and shrugged off lukewarm economic news.

The economy is still weak and there are fears over global geopolitics, but the market is taking this leap of faith that things are not as bad as perceptions

Peter Boockvar, Miller Tabak

Analysts said investors were taking a "leap of faith" by holding on to their gains rather than selling out immediately.

But they warned that the broader picture was still uncertain and that a longer period of positive trading was needed before confirming a changing trend.

Brief respite?

The Dow Jones index of leading shares closed up 0.57% on Friday at 8,322.

Although not a huge gain, traders were cheered by the fact that the week had closed in positive territory, with a 6% gain overall for the Dow Jones in the last five days.

"There has been a trend change," said Brian Pears, head of equity trading at Victory Capital Management. But he added, "I don't know how long it will last".

Wall Street's strength was almost matched across Europe, where markets closed down only a fraction after gains earlier in the week.

We just have to wait a few more trading sessions to see if we have a more positive tone

Stephen Carl, Williams Capital Group

London's FTSE 100 index closed the week 1% lower at 4,130 while the Paris Cac index was down just 0.8% and Germany's Dax a mere 0.3% lower.

Analysts said investors had shown little interest in economic data which showed weak US inflation and a sharp rise in its trade deficit. Recent volatility, it seems, was having a week off.

"We have gone from being extremely oversold to very overbought. It is due for a rest," said Brian Bush, director of equity research at Stephens Inc.

Tech lift

Investors chose to concentrate on a run of positive earnings updates, with Microsoft boosting optimism thanks to forecast-beating earnings.

There was also good news this week from online auction group ebay, cosmetics group Avon and General Motors, all of which heightened hopes that a recovery just might, finally, be on the way.

"We just have to wait a few more trading sessions to see if we have a more positive tone," said Stephen Carl, head of equity trading at The Williams Capital Group.

The bigger picture is still uncertain and the continued threat of an attack on Iraq, coupled with flat economic data means some market watchers have yet to be convinced.

"The economy is still weak and there are fears over global geopolitics, but the market is taking this leap of faith that things are not as bad as perceptions," said Peter Boockvar, equity strategist at Miller Tabak.