World markets recover poise after big sell-off

LONDON — European stock markets bounced back Monday, helped by some upbeat German economic data, a day after a deep sell-off around the world sent major indexes down to levels from the beginning of August.

By (AP)

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Published: Tue 18 Aug 2009, 7:41 PM

Last updated: Thu 2 Apr 2015, 3:45 AM

The FTSE 100 index of leading British shares was up 33.06 points, or 0.7 percent, at 4,678.07 while Germany’s DAX rose 32.04 points, or 0.6 percent, to 5,233.65. The CAC-40 in France was 20.09 points, or 0.6 percent, higher at 3,439.78.

Asia’s markets recovered, too, but Shanghai’s main market recouped only a small chunk of losses from Monday, when worries about U.S. consumer spending weighed on markets worldwide. Investors are aware that without the support of the U.S. consumer, which accounts for around 70 percent of the U.S. economy and 20 percent of the global economy, recovery will be muted at best.

Some of those concerns were eased somewhat on Tuesday after another batch of better than expected economic data out of Germany, Europe’s biggest economy. Notably, the ZEW research institute painted a far rosier picture of investor sentiment than expected. Its main confidence index spiked up to 56.1 in August, way ahead of July’s 39.5 and analysts’ expectations for a more modest increase to 45. The news that Germany unexpectedly returned to growth in the second quarter and the big gains in equity markets over the month helped sentiment bounce back strongly.

“Today’s results confirm the picture that the German economy is slowly returning to normality after being hit hard by the fallout from the global economic downturn,” said Jorg Radeke, economist at the Centre for Economic and Business Research.

Volumes remained extremely light in holiday trading so investors were wary of making too many predictions about whether the big rally seen in stocks since March — with a few downtrends since — will continue through to the end of the year.

As is often the case, much may depend on what happens on Wall Street when trading traditionally picks up after the Labor Day holiday in early September.

“The heavy selloffs in equities across all time zones in yesterday’s trading serve as a reminder that the threat of a sustained episode of risk aversion remains,” said Gareth Berry, an analyst at UBS.

For now though, U.S. stocks are expecting to recover some of their poise later following big falls Monday. Dow futures were up 48 points, or 0.5 percent, at 9,168 while the broader Standard & Poor’s 500 futures rose 5.4 points, or 0.6 percent, to 983.70.

Earlier in Asia, Tokyo’s Nikkei 225 stock average rose 16.35 points, or 0.2 percent, to 10,284.96 and Hong Kong’s Hang Seng gained 168.62 points, or 0.8 percent, to 20,306.27. South Korea’s Kospi added 0.2 percent.

In China, the Shanghai benchmark recouped early losses to rise 1.4 percent to 2,910.88. China’s market is one of the year’s best performing, but fears about restricted bank lending and the economic outlook have led investors to unload shares in recent weeks. Also, some mutual funds have been forced to lighten their equities positions and insurance companies with stock holdings are nearing their regulatory limits on such bets, analysts said.

Many analysts consider the Chinese market a lead indicator for worldwide stocks — over the last couple of years, Chinese stocks have led where others have followed. Sharp falls in the summer of 2007 proved to be a precursor to the start of the seizing up in credit markets, the prime cause of the global recession.

The Shanghai index is down more than 16 percent since marking its annual high earlier this month and below its 50-day moving average, in contrast to all other major markets around the world. The S&P 500’s 50-day average is 945, meaning that the broader U.S. index has room to fall if it followed China’s lead.

Not all markets rose in Asia. Taiwan’s key index dived 2.1 percent and Indonesia’s benchmark lost 2.6 percent and Australia’s market edged down.

Oil prices also rebounded too following big falls over the last two trading sessions. Benchmark crude for September delivery up 79 cents to $67.54.

The dollar was 0.6 percent higher at 95 yen while the euro rose 0.3 percent to $1.4108.

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