UK Stocks Lead European Rally, US Faces Volatility
The Associated Press
06/19/09 - 01:24 AM EDT
PAN PYLAS
LONDON (AP) European stock markets closed higher Friday as hopes of a recovery in the U.S. economy were buoyed by a run of upbeat economic data, though volatility was expected to complicate trading in the final hours on Wall Street as a number of financial contracts expire.
In Europe, the FTSE 100 index of leading British shares closed up 65.07 points, or 1.5 percent, at 4,345.94 while Germany's DAX advanced only 1.98 points to 4,839.46. France's CAC-40 index was 27.21 points, or 0.9 percent, higher at 3,221.27.
The FTSE outperformed its peers largely because mining stocks, a major part of the index, rebounded strongly amid higher energy and commodity prices, while insurers, such as Aviva PLC, were buoyed by a recommendation from analysts at Deutsche Bank. A strong trading update from cruise liner Carnival PLC helped it close 6.6 percent higher.
"For today, on the FTSE, the negatives on the board are definitely in the minority," said Anthony Grech, market strategist at IG Index.
The gains on the FTSE were not enough to help it post a positive outcome for the week. The FTSE shed 2 percent. The CAC ended 3 percent lower where it started the week while DAX closed down 4 percent.
In the U.S., the Dow Jones industrial average was up 33.03 points, or 0.4 percent, at 8,588.63 around midday New York time while the broader Standard & Poor's 500 index rose 5.68 points, or 0.6 percent, to 924.05.
Traders are bracing themselves for heavy volume and bouncy prices because of the occurrence Friday of a quarterly "quadruple witching," which marks the simultaneous expiration of a number of different options and futures contracts. Stocks are more volatile during this period.
Investors have been in a cautious mood for most of the week amid mounting concerns that the recent economic news has not been quite good enough to justify the share rally in stock markets since the middle of March. However, strong U.S. jobs and industrial data Thursday helped ease those concerns and contributed to the solid gains on Wall Street.
The stock market rally around the world since March had been fueled by hopes that the U.S. economy will recover from recession sooner than anticipated. As equities usually start rising 6 to 9 months before actual recovery emerges in the official data, this suggests investors believed the massive sell-off in markets during the most acute phase of the financial crisis was overdone. Some of the world's major equity indexes are now in positive territory for 2009.
That optimism dissipated in recent days, and despite the relatively upbeat U.S data Thursday, analysts say investors need clearer evidence that the world economy and company earnings are recovering to make sense of stock valuations. In March, many investors saw valuations around the world as particularly cheap and started buying into the market.
Interest rates, particularly on U.S. government bonds have been rising steadily over recent weeks on expectations that the U.S. Federal Reserve will raise borrowing costs sooner than previously anticipated. Meanwhile, oil prices have more than doubled over the past couple of months on hopes that a global economic rebound will boost demand for crude. Oil prices pushed back up towards $72 a barrel, rising 43 cents to $71.90 in electronic trading on the New York Mercantile Exchange.
"The two main issues seem to be the precise timing of the expected sustainable recovery and the current value of market prices relative to this expected timetable," said Herve Goulletquer, an analyst at Calyon Credit Agricole.
"While it is very ambitious to provide solid answers, the mood among investors is hesitant," he added.
Earlier in Asia, Japan's Nikkei 225 stock average added 82.54 points, or 0.9 percent, to 9,786.26, and Hong Kong's Hang Seng climbed 144.27, or 0.8 percent, to 17,920.93. South Korea's Kospi inched up 0.6 percent to 1,383.34.
Taiwan's key index rose 1.4 percent, while Australia's benchmark inched up 0.2 percent.
Shanghai's index stretched its winning streak with a 0.9 percent gain as the government lifted a nine-month ban on initial public stock offerings.
The moratorium was imposed last year after the country's markets plunged, so Friday's news was seen as vote of confidence in the health of China's markets and economy. Investors also were hopeful the rollout of IPOs would be gradual, the better to avoid a deluge of new offerings that could depress prices in the broader market.
The dollar was down 0.2 percent at 96.49 yen, while the euro rose 0.2 percent to $1.3928.
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AP Business Writers Tim Paradis in New York and Jeremiah Marquez in Hong Kong contributed to this report.
