A pedestrian passes the London Stock Exchange headquarters. The FTSE 100 index ended up 2.58% at 6,061.61 points yesterday.
AFP
London
European stocks rebounded yesterday as investors snapped up bargain shares and eyed hopes of more eurozone stimulus, after recent heavy falls sparked by global growth worries.
London’s benchmark FTSE 100 index of top companies ended the day 2.58% higher at 6,061.61 points.
In Paris, the CAC 40 index finished 2.57% ahead at 4,455.29 points compared with Tuesday’s close.
Frankfurt’s DAX 30 ended 2.22% up at 9,660.44, but troubled carmaker Volkswagen lost some of its earlier gains after announcing plans to recall millions of cars fitted with pollution-cheating software.
VW’s share price rose as high as €101.60, but ended 2.68% ahead at €97.75 compared to Tuesday’s close.
In foreign exchange, the euro slipped to $1.1168 from $1.1254 late on Tuesday in New York, as markets awaited Friday’s key US jobs data.
“There was a healthy sense of relief about the move higher in European shares yesterday. For a minute there on Monday, stocks were on the precipice of another China-induced thrashing,” said Jasper Lawler, market analyst for CMC Markets.
Eurozone inflation unexpectedly fell to negative 0.1% in September, data showed, suggesting a dangerous spell of falling prices could be returning to Europe.
The return to negative territory will add to pressure on the European Central Bank to increase its huge quantitative easing (QE) stimulus programme which is meant to ward off deflation and keep the economy on track.
Analysts surveyed by Bloomberg had expected a zero rate after a gain of 0.1% in August.
“Whilst one month of negative inflation is not going to send (ECB head) Mario Draghi scrambling to open his big box of ECB QE, it does suggest that, perhaps, the central bank’s stimulus programme is not having the same effect as it did when it was first introduced back in March,” said analyst Connor Campbell at trading firm Spreadex.
Back then, the ECB launched a more than €1tn quantitative easing stimulus programme running through to September next year to get eurozone inflation closer to its 2% target.
The ECB’s scheme initially appeared to work, slowly pushing inflation back up in core eurozone economies such as France and Germany.
But the rise has now stalled in Germany, the eurozone’s biggest economy, stoking speculation of more ECB action.
US stocks replicated the rises in Europe on speculation of further monetary stimulus.
In midday trades, the Dow Jones Industrial Average stood up 0.74% at 16,168.02 points.
The broad-based S&P 500 rose 0.12% to 1,884.09 points, while the tech-rich Nasdaq Composite Index gained 1.17% at 4,570.00.
Despite the gains, Europe’s stock markets have suffered hefty losses during the third quarter on fears surrounding China’s slowing economy.
Frankfurt has slumped by 12%, while both London and Paris have each shed about 8% in value over the last three months.
The day’s stronger trading notwithstanding, Campbell warns that the underlying causes of market slackening still remain.
“That’s effectively it for another quarter. Not that things will be radically different at the start of Q4; the timeline for a US rate-hike is still non-existent, Volkswagen is still only at the beginning of a long and costly scandal, and, most importantly, the Chinese economy is still stalling,” he said.
Lawler said the same is true for Wall Street.
“Wednesday’s jump is too little too late in a bad quarter for US equities, which are set for the worst quarterly decline in four years. Things could be better in the next quarter if the Fed can at least remove the uncertainty by raising interest rates. Though the slowdown in China isn’t likely to abate anytime soon without a bigger dose of government stimulus.”
