In London, the FTSE 100 index lost most of its early gains to stand at 6,479.6 points, up 0.2 per cent. In Paris, the CAC 40 index stood at 6,397.7 points, up 0.2 per cent. In Frankfurt, the DAX index gained 0.3 per cent to 7,099.03 points. The euro-zone benchmark Euro Stoxx 50 index added 0.7 per cent to 5,110.5 points.

The foreign exchange markets were also in suspended animation. The euro fell as low as 0.8545 dollars following the announcement of the Bush victory, only to rise back above 0.8580 dollars when the election went back into the melting pot. European government bond prices fell on news of the Bush win, but recovered when the result was thrown into question. Investors are betting that a Bush victory will trigger a flood of buying on Wall Street, sending stock markets around the world broadly higher, and boosting the dollar in the short run.

Analysts have argued that Bush's proposals for tax cuts and his general hands-off stance as a policy-maker will give the economy a boost and prove equity-friendly. Democrat candidate Al Gore, on the other hand, is seen as more market neutral, though his more prudent fiscal stance is likely to prove less antagonistic to the bond market and less inflammatory for interest rates and inflation.

Asian markets responded to the ebb and flow of the dramatic night in the United States. The Japanese market, which closed with the result undecided, rose 0.4 per cent. But investors in Hong Kong sent the market 1.1 per cent lower.

A Bush win is expected to give an additional boost to traditional sectors such as energy, pharmaceuticals and tobacco, because of regulatory threats posed to them by the Democrats. Several stocks in these industries led the gainers in anticipation that the Texan governor's victory would ultimately be confirmed. Tobacco group BAT gained 3.8 per cent to 498.25 pence, while Imperial advanced 2.2 per cent to 700 pence. Drugs company Glaxo added 2.6 per cent to 2,074 pence, while fellow pharmaceuticals giant SmithKline Beecham put on 2.8 per cent to 947.5 pence. BP Amoco rose 0.4 per cent to 578.5 pence, while Shell put on 1.4 per cent to 550.5 pence.

In other corporate news, German power group E.ON gained 1.3 per cent to 64.09 euros after selling its 42.5-per cent stake in Orange Communications to France Telecom for at least 1.6 billion euros. France Telecom rose 1.1 per cent to 121 euros.