Europe's main stock markets rebounded on Thursday, on the eve of crucial banking stress-test results, as dealers set aside downbeat Fed comments to focus on upbeat data and earnings.
In midday trading, London's benchmark FTSE 100 index of top companies soared 1.04 percent to 5,269.06 points, Frankfurt's DAX 30 jumped 1.65 percent to 6,089.14 points and the Paris CAC 40 leapt 1.74 percent to 3,554.77.
The Stoxx 50 index of top eurozone shares rose 1.72 percent to stand at 2,685.27 points.
Investors shrugged off Wall Street losses which came after Federal Reserve chairman Ben Bernanke highlighted an "unusually uncertain" outlook for US economic recovery from recession.
"Markets appear to be setting aside Bernanke's cautious outlook for now," said CMC Markets analyst Michael Hewson.
He added: "As such, the markets are focusing on the earnings picture for now especially with the positive earnings numbers that came after the bell in the US.
"Morgan Stanley's numbers gave the banking sector a fillip, but for the gains to be maintained we need to get confidence that the stress test results whenever they are released are credible, otherwise we could well be falling back down."
Top US bank Morgan Stanley said on Wednesday that profits surged to 1.96 billion dollars in the second quarter.
Better performance at the firm's trading business helped build on a gain of 149 million dollars in the same period last year and strong profits from the first three months of 2010.
Meanwhile on Friday, the London-based Committee of European Banking Supervisors will to publish the results of "stress tests" done by national regulators on 91 European Union institutions that represent 65 percent of the EU banking sector.
The tests are designed to assess the capacity of major European lenders to withstand economic or financial crises.
Elsewhere on Thursday, a leading indicator of economic activity, the purchasing managers' index for the 16-nation eurozone, accelerated for the first time in three months in July.
The latest purchasing managers' index (PMI) compiled by data and research group Markit rose to 56.7 points, from 56.0 in June. Any score above the 50-point line indicates economic growth.
"The pick up in eurozone manufacturing and service sector activity in July reported by the purchasing managers is welcome news and boosts hopes that the eurozone will see decent growth in the third quarter after a likely marked pick up in the second quarter," said IHS Global Insight economist Howard Archer.
In Asian trading on Thursday, markets recoiled after Bernanke's comments, but Hong Kong and Shanghai pushed higher amid hopes that China will ease off on measures to cool the economy.
Tokyo sank 0.62 percent on its fifth straight day of losses, taking its cue from Wall Street's 1.07-percent plunge.
Copyright 2010  AFP Global Edition
