European Closing Update: Thank Goodness for Vodafone

LONDON -- Sentiment is a powerful thing.

When Europe went home Monday there was a sense that nothing was going to lift the gloom from the markets. But then better-than-expected fiscal first-half results from Vodafone (VOD)did just that.

The world's largest mobile-phone operator rose 24.25p, or 10.2%, to close at 262.5 ($3.83). This alone was enough to add 65 points to the FTSE 100, which shrugged off all of Monday's woes on Wall Street to close 138 points, or 2.2%, higher at 6413.

As well as boosting its own stock, Vodafone's results helped the whole technology and telecom sectors bounce back with a vengeance. The Techmark 100 closed up 99 points, or 3.3%, at 3177.

So has the market rally turned, or was today's action just a dead-cat bounce? Nick Glydon, Chase's top-rated technical analyst, believes it is the latter. He argues that unless the Nasdaq Composite Index climbs above 3500, the market will remain in a downtrend. Many investors will hope he is proved wrong.

Nevertheless, today many of the recently hammered stocks recouped some of their losses.

After declining below 16.00 from the 24.50 it stood at last Wednesday, the sellers of Bookham Technology (BKHM) seemed to have decided that enough was enough. The stock was the FTSE 100's star performer as it added 205p, or 14.7%, to 16.00. Those investors who managed to stay long should be encouraged by tonight's close, and brokers said that they saw some fresh buying for Bookham from bargain hunters.

Other major gainers included Scoot.com (SCOP), which shot up 15.1% to 81.75p, and Orchestream, which added 15.2% to 417.5p.

Chip designer ARC International rose 31p, or 12.3%, to 282.5 ahead of its interim results Wednesday, which will be the company's first set of figures since floating at the end of September. Autonomy Corporation (AUTN) was also a good riser ahead of its third-quarter results Wednesday. The stock closed up 126p, or 3.9%, to 33.61.

On the Continent the CAC-40 in Paris closed up 188.3 points, or 3.1%, at 6225.9, and the Xetra Dax in Frankfurt was up 180.3, or 2.7%, at 6922.4 late in German trading. The Neuer Markt's tech-heavy Nemax 50 index happily snapped back 183.5 points, or 4.9%, to 3938.8.

Technology shares that got slammed Monday led the recovery, as STMicroelectronics (STM) closed up 3.50 euros, or 7.2%, to 51.90 ($44.61), Epcos (EPC) surged 4.67 euros, or 5.6%, to 88.37, and software maker SAP (SAP) rose 8.20 euros, or 4.1%, to 209.70.

Telcos also had a great session on the back of Vodafone's earnings and bullish outlook. France Telecom (FTE) rallied 10.60 euros, or 10.1%, to 115.40, Deutsche Telekom (DT) jumped 2.62 euros, or 6.9%, to 40.65 euros, and Telefonica (TEF) closed up 1.53 euros, or 7.5%, to 21.93.

Telecom-equipment makers weren't left out of the fun, as Alcatel (ALA) surged 4.35 euros, or 6.9%, to 67.90 and Nokia (NOK) closed up 4.03 euros, or 9.5%, at 46.50.

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