Global stock markets rebounded yesterday with traders brushing off a slump in German investor confidence, although concerns lingered over US President Donald Trump’s economic agenda and geopolitical crises.
Indices had begun the week lower, with share prices also pressured in recent sessions by the terror attacks in Spain as investors sought haven investments such as the yen and gold.
“Stock markets in Europe have pushed higher yesterday as traders decide to take on more risk,” said CMC Markets UK analyst David Madden.
“While the situation regarding North Korea hasn’t changed in either direction, investors are using the lull to pick up relatively cheap stocks.”
London’s benchmark FTSE 100 index gained 0.9% as gains for mining stocks offset a 75% plunge in the share price of subprime lender Provident Financial.
“Provident Financial shares collapsed today after the company issued a profit warning,” said Madden.
A poor re-organisation of its debt-collecting division was to blame for the profit warning, and Provident Financial suspended dividend payments as its chief executive also resigned.
“Companies don’t recover from a shock like this easily,” added Madden.
Elsewhere, Frankfurt’s DAX 30 index jumped 1.4% higher despite a monthly survey showing that confidence among German investors plunged in August.
The ZEW institute’s closely-watched barometer fell to 10.0 points in August from 17.5 in July, well short of the 15.0 points predicted by analysts surveyed by data company Factset.
“The very significant fall in business expectations reflects nervousness about the future path of growth in (Europe’s largest economy) Germany,” ZEW chief Achim Wambach said in a statement.
In Asia yesterday, stock markets rose ahead of a closely watched meeting of central bankers later in the week.
Wall Street also pushed higher, with the Dow up 0.7% nearing midday.
“US stocks are gaining ground in early action following yesterday’s lacklustre session, though political and geopolitical concerns linger and the markets are paying close attention to this week’s speeches by Fed Chair (Janet) Yellen and ECB President (Mario) Draghi,” analysts at Charles Schwab brokerage said.
Equities have been struggling in recent weeks due to the continuing standoff between the United States and North Korea, which had been compounded by Thursday’s terror attack in Barcelona.
Meanwhile Trump’s woes have fuelled speculation he will struggle to push through his market-friendly, economy-boosting policies, which fanned a global market rally in the months after his November election.
The loss of top advisor Steve Bannon last week and talk that a leading member of his finance team could also leave have added to his problems.
Investors are also eyeing the Jackson Hole symposium in Wyoming at the end of the week, which brings together the world’s top central bank chiefs, for clues on when the US Federal Reserve and European Central Bank will move next to rein in their massive support for markets.
On the debt markets, the rate of return on 10-year Italian government bonds shot up 0.7 percentage points to 2.1% after former prime minister Silvio Berlusconi spooked investors with talk about introducing a currency in parallel to the euro.
Berlusconi is courting the anti-immigrant and anti-euro Northern League to create a right-wing bloc to contest parliamentary elections due next year.
In London, the FTSE 100 closed up 0.9% at 7,381.74 points; Frankfurt — DAX 30 rose 1.4% at 12,229.34 points and Paris — CAC 40 ended up 0.9% at 5,131.86 points yesterday.
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