LONDON, Aug 20: World stock markets rose on Monday, extending gains made thanks to the Federal Reserve’s willingness to help with the fallout of a US home loans crisis, but a listless Wall Street capped gains elsewhere.
The London FTSE 100 index closed up 0.24pc at 6,078.70 points.
In Frankfurt the DAX 30 gained 0.39pc to 7,407.53 points and the Paris CAC 40 climbed 0.67pc to 5,399.38 points.
Earlier European enthusiasm was somewhat dampened when Wall Street opened mixed, bringing European bourses off their highs, as investors wondered just how far the Fed will go to lessen the impact of mass mortgage defaults in the US which have sent fear rippling through world markets.
The Dow Jones shed 0.23pc at 13,048.51 in early New York trading, having hovered around the unchanged mark since the opening.
European and US equities had risen sharply on Friday after the US Federal Reserve eased global economic fears by slashing one of its key interest rates.
Earlier in Asian trading on Monday, Tokyo saw its biggest single-day points rise since June 2006, recouping more than half of Friday’s 5.42pc plunge.
Shanghai leapt 5.33pc to a record closing high.
However, New York investors shied away from a new buying spree, preferring instead to see whether the Fed will follow up Friday’s largely-symbolic rate cut and large liquidity injections into the market with more aggressive credit easing.
Analysts agreed that the Fed’s stance was reassuring, but Peter Cardillo, at Avalon Partners, said current financial turmoil could spill over into the real economy, making investors “cautious”.
The same sentiment prevailed in Europe. “There is still a lot of fear in the market,” one Frankfurt-based trader told Thomson Financial, adding this could continue until the end of the week.
“There’s little to suggest that the rampant volatility we’ve seen of late is yet behind us,” CMC Markets trader Adam Neal said in London.
“The good news is that there’s no bad news, but the situation remains uncertain,” added a strategist at an independent Paris brokerage.
French Finance Minister Christine Lagarde said on Monday that the worst of the US mortgage crisis was over.World stock markets had been tumbling since August 9, as concerns mounted over the economic fallout from the weak subprime, or high-risk, home loan market in the United States.
“There is potential for the markets to remain volatile over the next few weeks as investors eye whether or not the central banks across Europe will cut interest rates,” said Mark Priest, head of equity sales at Tradindex.
The US Federal Reserve on Friday cut the rate it charges commercial banks to 5.75 percent. The move raised expectations that the Fed may also lower its key federal funds rate, the overnight rate banks charge each other.
Investors across Asia appeared optimistic earlier on Monday, eager not to miss a recovery after recent heavy losses.
Hong Kong closed up a huge 5.9 per cent, Seoul won 5.7 per cent and Sydney jumped 4.6 per cent.
“While the US credit market crisis may not disappear overnight, the Fed’s decision ... has demonstrated their will to act and help reduce the uncertainty and volatility in the event that credit markets deteriorate further,” DBS Vickers Securities of Singapore wrote in a note to clients.
But there were also some gloomy voices. “What happened in the markets last week was of cataclysmic proportions,” said Mark Cutis, chief investment officer at Japan’s Shinsei Bank.
He said that, although Japanese equities looked cheap, last week’s sell-off was only “a prelude to what’s going to happen.”
Among Europe’s second-tier markets, Madrid’s Ibex-35 edged 0.22pc higher to 14,269.1, the Bel-20 in Brussels gained 1.14 percent to 4,117.02, Amsterdam’s AEX put on 1.12 percent to 504.57 and Zurich’s SMI advanced 0.60 to 8,594.33.—AFP