The world's stock markets gave mixed signals on Thursday, with sentiment remaining shaky amid ongoing uncertainty about Iraq.

Markets at 2100 GMT

FTSE +2.7% Paris Cac +2.6% Frankfurt Dax -0.47% New York Dow -2%

In London, the FTSE had a good day, holding on to early gains to close 94.9 points, or 2.7%, higher at 3,579.

It was a similar story over in Paris, with the benchmark Cac 40 index up 2.6% at 2,914, by 1812 GMT, while Germany's Dax closed down 0.47%, at 2,694.

But after Wednesday's late rally, Wall Street shifted into reverse, with the Dow Jones Industrial Average dropping 165 points, to close 2% down at 7,945.

Recovery fears

Record losses reported by media giant AOL Time Warner unnerved investors already on edge over the possibility of war with Iraq and a sluggish economy.

Disappointing GDP figures showed the US economy slowed alarmingly in the final quarter of 2002, growing at an annual rate of just 0.7%.

Dan McMahon, head of listed trading at CIBC World Markets, said: "I don't think there's a lot of reason to be extending yourself to buy stocks.

"You have war fears and you also have concern about the frailty of the economic recovery, which lends itself to corporate earnings.

"There is definite concern about the recovery or lack thereof."

'Oversold'

In London, the banking sector led the way, accounting for nearly half of the FTSE 100's gain, as the sector recovered after several days of heavy losses.

"These stocks have been so oversold on worries about bad debts that could occur.

"People think now there's a chance to trade at these levels and actually make a gain in the short term," said Martin Dobson, head dealer at NatWest Stockbrokers.

Pharmaceutical stocks gained ahead of results by giant AstraZeneca out later in the day, while telecoms and insurers were also trading higher.

Oil surge

The US dollar also enjoyed a comeback in London trade, hovering above 1.07 to the euro.

While a surge in oil prices led to gains for oil companies BP and Shell and France's energy giant, TotalFinaElf.

The sudden upturn comes after days of dramatic falls.