European stock markets jumped Wednesday, as Wall Street’s late-session rebound overnight boosted confidence despite continuing worries about the health in the euro and the tensions within the Korean peninsula.
The euro remained weak in early European business. German bunds eased back, although oil and gold prices rose.
“After the U.S. indexes pared most of their earlier losses yesterday, some persons are hunting for bargains about the expectation that the stock market place may find support” near current levels, said Park Seok-hyun at KTB Securities in Seoul.
It has been encouraging to see buyers willing to step up to the plate, both on Monday and Wednesday, to invest in beaten-up blue-chip names, stated IG Markets.
“This confidence has not been evident in recent weeks and probably marks a tiny, but critical change in underlying sentiment,” it claimed.
The Stoxx Europe 600 Index rose 1.9% to 236.62. London’s FTSE 100 Index was up 1.6% at 5022.45, Frankfurt’s DAX extra 1.5% to 5757.52, and Paris’s CAC-40 Index was up 2.5% at 3414.07.
Nonetheless, the global equity market is volatile—up one day, down the next, said IG. “These topsy-turvy disorders have investors and traders second-guessing themselves, which is why we’re not seeing a definitive trend. These ailments are probably to persist for sometime as the macro issues at hand are unlikely to be resolved from the near-term,” it additional.
Germany’s proposal to extend the scope of its short-selling ban, along with the Spanish banking sector, seem to be weighing on markets, mentioned Deutsche Bank. Nonetheless, much better headlines from Greece, registering a sharp decline in its deficit, and Italy taking measures to cut down its deficit, in conjunction with expected regulatory intervention to prevent an outright euro free-fall, have been amongst the factors some bearish trades may perhaps have squared out, stated Credit Agricole.
“The positive run of data is set to continue these days, with U.S. durable goods orders [at 1230 GMT] set to rebound in April due in part to firm aircraft orders whilst [U.S.] new homes sales [at 1400 GMT] are likely to rise in April following the 26.9% surge in March,” extra Credit Agricole.
Meanwhile, tensions about the Korean peninsula are rising, with the North Korean leader, Kim Jong Il, reportedly telling the military Tuesday to get combat ready. Also, North Korea explained it will “totally freeze” relations with South Korea and pull out of a nonaggression pact with Seoul, marking the widest rift between the Koreas in two decades.
The moves come a day soon after Seoul penalized Pyongyang for allegedly torpedoing and sinking a South Korean ship in March. As a result, “U.S and China’s leaders are (re)focusing on Korean concerns and there are many pinning their hopes on a successful bout of diplomacy,” stated Adrian Foster, analyst at Rabobank.
Among stocks in Europe, banking shares recovered some from the previous session’s losses ahead with the European Commission’s move to propose legislation requiring European Union governments to create bank crisis funds supported by up-front taxes on financial institutions, expected around 1200 GMT.
Basic-resource stocks notched strong gains following Tuesday’s decline within the sector. Even so, the correction has been overdone, said Nick Hatch, analyst at ING Bank. “Short-term concerns have provided the market place with an entry point to benefit from ongoing long-term growth in China and other leading developing markets. The metals and mining sector supplies investors with access to these growing markets without being as exposed as other sectors to Europe’s troubles,” he claimed.
The pan-European Stoxx 600 banks index rose 2.4% to 189.05, whilst the index for the basic-resource sector extra 3.8% to 465.65.
In Asia Wednesday, Japan’s Nikkei Stock Average added 0.7% whilst China’s Shanghai Composite Index climbed 0.2% and Hong Kong’s Hang Seng Index was 1.1% greater.
Meanwhile, South Korea’s Kospi was 1.3% higher, despite the persisting concerns over tensions with North Korea and a weakening Korean won.
Still, some traders were wary of the rebound. “It’s nonetheless too early to tell if this rise can be sustained. Geopolitical events are getting center stage again and will keep investors on soft soil,” said Grace Cerdena, head of operations at 2TradeAsia from the Philippines.
Inside the European foreign exchanges, the euro failed to make headway as investors remained unconvinced that Europe can master the debt problems that undermine its currency. The euro was trading at $1.2324, down from $1.2345 in New York late Tuesday. The dollar was barely changed at ¥90.15, down from ¥90.24.
Amongst other assets, spot gold was at $1208.30 per troy ounce, up $4.15 from Tuesday’s New York close. Within the oil marketplace, Nymex July crude was up $1.30 at $70.05 per barrel.
On Wall Street Tuesday, stocks ended mixed, with Chevron and Exxon Mobil among the decliners as crude oil futures slipped. By contrast, the Standard & Poor’s 500 index edged into positive territory following materials companies and consumer-discretionary stocks staged late rallies.
After trading sharply lower for the first half with the day, the Dow Jones Industrial Average ended down just 0.2% at 10043.75. But the S&P 500 edged up 0.1% to 1074.03, although the Nasdaq slipped 0.1% to 2210.95.
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