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European markets rise on war bets

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•  Commanders: U.S. | Iraq
•  Weapons: 3D Models

LONDON, England -- European shares vaulted higher on Monday as investors bet on a quick war against Iraq after the United States, Britain and Spain ended efforts to win U.N. approval for an ultimatum to Baghdad to disarm.

London's FTSE and the CAC in Paris both jumped 3.3 percent while Zurich's SMI climbed almost 3 percent.

At 1630 GMT, with only Frankfurt still trading, the FTSE Eurotop 300 index of pan-European blue chips was up 3.3 percent at 779.26 -- a three-week high -- after reversing an earlier loss of 3.2 percent.

The narrower DJ Euro Stoxx 50 index rose 3.7 percent to 2,157.34.

Dutch insurer ING led the charge higher as the insurance and tech sectors, which tend to exaggerate broader market movements, climbed more than 4 percent apiece.

Energy stocks also rallied, shrugging off a steep decline in oil prices to their lowest levels since January.

"The market believes the war will be short and quick, so there should be a relatively soft landing for crude oil prices," said Charlie Luke, oil analyst at Aberdeen Asset Management in London.

"Perhaps this is the war rally everyone has been hoping for," Nomura global strategist Anais Faraj told Reuters.

Investors have shied away from equities in recent months because of uncertainty about a possible war against Iraq. Strategists have predicted that once the uncertainty lifted, pent-up demand would drive equities higher again.

"But if this is the victory rally it is going to be short-lived unless we get that perfect war that follows on, which is a week or two and then a victory parade and then back out again," Faraj said.

On Wall Street, the Dow Jones industrial average leapt 2.4 percent and the tech-laced Nasdaq Composite rallied 2.8 percent as investors there also bet on a short war.

"The release of the uncertainty one way or another should have positive implications for the equity risk premium which has risen sharply in 2002 and 2003," said Florent Brones, global equity strategist at BNP Paribas in Paris.

Insurers -- which tend to exaggerate the broader market's movements -- topped the leader board, headed by Dutch group ING and Benelux banking and insurance group Fortis.

ING had earlier fallen almost 10 percent after it posted a net loss of 9.6 billion euros after taking a 13.1 billion euro goodwill charge.

French insurer Assurances Generales de France also reversed an earlier steep loss on the back of a 63 percent fall in 2002 profits to end 4.7 percent higher.

Among tech stocks, which like insurers also carry a high beta -- or market-sensitive -- status, Swedish telecom equipment maker Ericsson jumped 14.3 percent after it named a new chief financial officer and deputy chief executive officer.

The announcement completed an overhaul of its top management to fight back from years of losses.

Finland's Nokia, the world's largest mobile phone maker, rose 4.8 percent as it unveiled several new high-speed handset models aimed at cracking the market for the second-largest mobile phone standard.

Elsewhere German utility RWE added 5.3 percent after it forecast a double-digit rise in operating earnings in 2003, even as net profits shrink due to accounting for the costs of its ambitious global expansion.

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