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LONDON, England (Reuters) -- European share indices broke a two-session losing streak to end higher on Tuesday, with staffing agency Adecco leading the market rebound after it soothed fears surrounding accounting problems, but technology stocks weighed.
Weaker-than-expected quarterly revenues from Europe's software powerhouse SAP disappointed investors' hopes for stronger signs of a sector recovery, hitting its shares as well as some other IT stocks such as consultancy Cap Gemini.
The FTSE Eurotop 300 index of pan-European blue chips closed 0.12 percent firmer at 970.77 points, with buyers only narrowly outweighing sellers, while the DJ Euro Stoxx 50 index rose 0.29 percent to 2,801.97 points.
The Eurotop 300 ended a three-year bear run to close higher in 2003, with gains since the start of 2004 bringing to 42 percent its rebound from mid-March's six-year trough, as investors bet that the economic recovery would help generate more equity gains.
Trading volume was a healthy 3.2 billion euros but some investors were reluctant to open new positions ahead of the publication of key results from Intel and General Electric in looking for further reassurance that a recovery in earnings is on track.
"Investors may want to keep their powder dry until such time as there is confirmed evidence that these results are good and if possible better than expected," said David Buick from Cantor Index.
Markets, which have so far been focusing on restructuring stories, are now waiting to see signs of top-line growth and predictable earnings, strategists said.
"Quality is going to be very important going forward," said Robert Jukes, a strategist at Credit Suisse First Boston. "The recent market moves are now more related to fundamentals -- it's the second stage of the recovery story."
SAP's three-percent drop in quarterly software revenues, the 10th straight quarter of year-on-year declines, therefore met with slight disappointment by the market on Tuesday.
Shares in France's Cap Gemini, which advises on software and computer systems, and installs, runs and maintains those, dropped four percent on SAP's announcement, while those in smaller domestic peer Atos Origin sagged five percent.
Investors also awaited comments from Federal Reserve Chairman Alan Greenspan -- just a few minutes before European bourses closed -- who said he saw no problem for now in funding the massive U.S. trade gap.
Caution ahead of Greenspan's speech, and a warning shot from European Central Bank Chief Jean-Claude Trichet that 'brutal' foreign exchange moves were unwelcome, helped knock the euro from a record peak of around $1.2898.
Around the main share indices in Europe, Paris and Zurich closed up 0.5 percent and 0.9 percent, respectively, and Frankfurt ended unchanged. But London closed 0.2 percent lower as market heavyweight Tesco dropped four percent after a 770-million pound cash call.
Tesco, Britain's biggest grocer, said late on Tuesday it had completed the sale of 315 million shares at 428 pence apiece to raise 773 million pounds ($1.43 billion).
Adecco rebounds
Things looked rosier for Adecco, which lost a third of its market value on Monday after revealing accounting problems. The world's top temporary jobs agency regained 8.7 percent after management sought to dispel fears of a Parmalat-type meltdown.
Media stocks were also in favor as the planned merger of Britain's Carlton Communications and larger rival Granada moved closer to completion, with Carlton shareholders giving overwhelming approval for the deal.
Carlton and Granada both closed about five percent higher.
Analysts said the companies' shares were also benefiting from increasing signs of life in the advertising market.
German autos were another bright spot, shrugging off the feisty euro, which dents their export earnings, with luxury maker Porsche leading the way up with gains of three percent while BMW added two percent and DaimlerChrysler gained 1.8 percent.
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