EUROPEAN STOCK markets recorded a second consecutive day of gains yesterday amid speculation of further stimulus measures in the US and hopes of Chinese growth.
European equities opened in positive territory, buoyed by better than expected factory figures from China which came out overnight. Sentiment was helped too by German manufacturing sector figures, which also beat market expectations.
Speculation about the possibility that the US Federal Reserve may take action to bolster the world’s largest economy lent support to markets on both sides of the Atlantic.
Frankfurt’s DAX index and Paris’s CAC rose as much as 2 per cent during the morning session. However, the rally lost momentum as the day wore on, and the main European bourses pared their gains somewhat. The DAX and CAC both closed 1.1 per cent higher. The UK’s FTSE 100 gained 0.7 per cent.
A weak performance by CRH weighed on the Iseq index, and left it straggling behind its European peers and down about 0.6 per cent on the day.
US stocks surged yesterday, with the SP 500 and the Nasdaq up more than 2 per cent, as buyers emerged before a highly anticipated address by US Federal Reserve chairman Ben Bernanke at Friday’s Jackson Hole economic forum.
Mr Bernanke’s speech will be closely watched for signs of intent to initiate further quantitative easing measures in an attempt to stimulate the economy. However, a Dublin broker said any economic news, good or bad, is being “seized on” by investors at the moment.
“Markets are trading very, very skittishly on any sort of news.”
Bill O’Neill, chief investment officer at Merrill Lynch Wealth Management for Europe, the Middle East and Africa, said although European stock markets are now trading close to the book value of their equity, it is difficult to see a “sustained bounce” coming soon.
“It will take another month or so before investors get a real sense of damage done to growth prospects from the summer turmoil,” Mr O’Neill said.
Against the backdrop of strengthening equity markets, gold dropped for the first time in seven sessions as some investors sold the metal after signs of slowing growth spurred a rally to a record $1,917.90 (€1,329.10) an ounce. – (Additional reporting Bloomberg)
