The Dublin market bounced back yesterday, rising by 2.5 per cent and outstripping its international peers.

However, while investor sentiment may have temporarily improved, the market remains extremely volatile. "We're having nearly 3 per cent swings - you couldn't call it a recovery," one trader commented.

The market was still "trying to find its level" and continued to take its lead from the US, he added.

US stocks rose yesterday, lifted by a fresh crop of strong earnings, but investors remained on edge after further signs of distress in the mortgage market.

"The market is finding its footing after the big declines in the last couple of weeks," said Rick Campagna, portfolio manager at Provident Investment Council in Pasadena, California.

"Earnings have been good. The US economy and the world economy are growing. The big picture hasn't changed."

The UK's leading share index, the FTSE, closed up 49.7 points, or 0.8 per cent, at 6,300.3, after hitting its lowest level since March in the previous session.

European stocks also recovered, as stellar results from bellwethers Nokia, Société Générale and Unilever distracted investors from recent worries over a credit market crunch. The pan-European FTSEurofirst 300 index closed up 0.7 per cent, at 1,536.97 points, rebounding from a 1.5 per cent drop in the previous session.

The DAX index ended at 7534.13 points, up 60.2 points or 0.81 per cent, while the CAC 40 index closed at 5682.07 points, up 27.77 points or 0.49 per cent.

The Iseq index emerged as the clear frontrunner yesterday, climbing by 2.5 per cent to 8,694.84, having lost 1 per cent of its value on Wednesday.

Leading bankers yesterday moved to calm the global markets even as they admitted that the shockwaves from of the US sub-prime collapse could put private equity deals on hold for the next few months. Analysts estimate large banks have underwritten loans worth $300 billion (€220 billion) to finance deals not yet been completed.

Barclays president Bob Diamond yesterday predicted that the consequences of the sub-prime collapse could take more than a year to be resolved.

Institutions with direct exposure to the sub-prime market continue to suffer. Shares in IKB plunged by 40 per cent yesterday following a government-led bail-out of the German lender, which warned this week of heavy losses in a fund it managed. - (Additional reporting: Reuters and Financial Times service)

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