LONDON, Aug 22: World stocks surged on Wednesday extending their recovery, with European, Wall Street and most of Asia’s markets posting gains despite lingering nervousness about problems in global credit markets.
Stock markets in London, Frankfurt and Paris jumped thanks to strong gains in mining, financial and auto share prices.
In London the FTSE 100 index surged 1.81pc at 6,196.00 points, while in Frankfurt the DAX 30 gained 1.02pc to 7,500.48 points and the Paris CAC 40 climbed 1.83pc to 5,518.17 points.
The Euro Stoxx 50 index of leading eurozone shares gained 1.19pc to 4,224.75 points.
Across the Atlantic Wall Street shares vaulted higher in mid-session deals as fresh news on corporate deals helped battered investors temporarily put aside worries about a credit squeeze.
Asian stocks closed mostly higher after earlier losing pace on fears of more bad news about the credit turmoil that battered confidence last week.
“Sentiment continues to be helped by signals that the Fed (US Federal Reserve) is willing to cut US interest rates if necessary to end the credit crunch and protect the real economy,” London research firm Capital Economics said in a market report.“It is therefore ironic that the recovery in equity prices actually makes it less likely that the Fed will have to act on its promise,” it said.
Alice Lhabouz of Meeschaert Asset Management said the rebound after a recent stock market crash had been encouraged by pledges on Tuesday by Fed chairman Ben Bernanke to use “all tools available” to avert a worsening of the housing and credit problems roiling financial markets.
“Everyone now hopes for a drop in the Fed’s main interest rate (currently fixed at 5.25pc) even if the economic context does not justify such a move,” she said.
In New York the Dow Jones Industrial Average jumped 0.90pc to 13,208.57 and the Nasdaq advanced 1pc to 2,546.41 in mid-session deals.
The broad-market Standard & Poor’s 500 index climbed 0.86pc to 1,459.50.
Jocelynn Drake at Schaeffer’s Investment Research said sentiment improved “on a mix of potential merger and acquisition news.”
After the stomach-turning declines of the past two weeks linked to housing and credit fears, Dick Green at Briefing.com said “there is a sense of normalcy returning to Wall Street.
“For the past two days the market has been hit with more worrisome headlines regarding the fallout from the subprime mess, and yet, it has stood its ground,” he said.
In Asia investors took an early breather after the recent rebound, but most bourses then notched up further gains in late trade on fresh hopes the worst of the US mortgage sector problems have passed.
A particular bright spot was Shanghai where stocks closed up 0.50pc at a fresh record high despite news of China’s fourth interest rate rise this year, a move aimed at reining in inflation and cooling the domestic economy.
Japanese investors were more cautious with the Nikkei-225 ending down a fractional 0.70 points on Wednesday, ahead of an interest rate decision by the Bank of Japan on Thursday.
Hong Kong closed 2.8pc higher as investors there continued to take heart from the recent announcement that mainland Chinese will be able to invest directly in securities traded in Hong Kong.
“I think the last week sell-off is a buying opportunity and I expect markets to recover their composure and move higher,” said Adrian Mowat, chief Asian equity strategist at JP Morgan Securities in Hong Kong.
Fitch Ratings said that the Asia-Pacific banks it covers have a low direct exposure to US subprime mortgage-backed securities.
“Losses on such investments will put a dent in annual earnings but do not pose a systemic risk as they are not a serious threat to the soundness of the banks we have surveyed,” the ratings agency said in a report.
Elsewhere in Asian trading on Wednesday, Sydney added 0.3pc, Wellington inched up 0.14pc and Taipei firmed 0.17. But Manila ended 0.8pc lower.
Elsewhere in Europe, the Dutch AEX index dropped 0.47pc to 506.04 points, and the Swiss SMI went 1.29pc higher to 8,714.59 points.
The SP/Mib added 1.64pc to 39,590 in Milan, the Ibex-35 gained by 0.84pc to close at 14,359.2 in Madrid, while in Brussels the Bel-20 gained 1.31pc to 4,171.02 points.—AFP