European Stocks, Dollar Rebound as Fears Ease
European stock markets rebounded Wednesday and the dollar also gained as Tuesday’s panic subsided.
Asian markets suffered steep losses Wednesday but were stable or off only modestly in early trading today, thanks in part to the turnaround in Europe.
In other trading, oil and gold prices fell in London after spiking higher Tuesday in the wake of the terrorist attacks on New York and Washington.
Among European stock markets, Britain’s FTSE 100 index gained 136.10 points, or 2.9%, to 4,882.10 after diving 5.7% Tuesday.
Germany’s DAX index rose 61.62 points, or 1.4%, to 4,335.15 after losing 8.5% Tuesday. The French market rose 1.3% after Tuesday’s 7.4% loss.
Most European markets opened sharply lower, then rallied. The European Central Bank, the Swiss National Bank and the Bank of Japan all moved to add liquidity to the financial system, helping to bolster confidence, traders said.
But some analysts advised against too much optimism.
“It’s just a bounce. People are unsure of what’s going on. People think it might be the bottom in the market, but we have to wait for the U.S. military reaction to what happened in America,” said Andy Schneller, a dealer at Merck Finck in Munich.
Meanwhile, the Canadian and Mexican markets were closed Wednesday as U.S. stock trading remained suspended. Brazil’s market did open, however, and the main index gained 2.6%. Canada’s market is expected to reopen today.
Before European markets opened Wednesday, most Asian markets suffered heavy losses. Japan’s Nikkei-225 index ended trading at 9,610.10, a decline of 682.85 points, or 6.6%. It was the lowest close since August 1984.
In midday trading today the Nikkei was off marginally, down 41.56 points, or 0.4%, to 9,568.54.
Smaller markets across Asia were hit even harder Wednesday. The South Korean bourse plunged by 12%--its largest percentage decline ever--while Hong Kong fell 8.9% and Singapore lost 7.4%.
But early today the South Korean index was up 3.4%, Hong Kong was up 1.6% and Singapore was off 0.2%.
Trading in Taiwan, Malaysia and Thailand was suspended Wednesday. Those markets were off sharply early today as investors had their first chance to react to the terrorist attacks on the United States.
Add up the losses, and Asia took a combined $226-billion market capitalization hit Wednesday, with airlines and insurers in particular hammered as images of the U.S. devastation repeatedly were replayed.
Analysts said the Nikkei would have fallen further Wednesday if Japanese regulators had not put in place tighter-than-usual limits on how far prices could fall in a bid to maintain stability.
European markets quickly regained their footing, helped by a decline in oil prices.
Brent crude oil in London, which jumped to $29.06 a barrel Tuesday from $27.45 on Monday, eased to $28.02 on Wednesday.
Oil pulled back after the Organization of Petroleum Exporting Countries gave assurances that oil markets would be adequately supplied.
Gold prices also fell after rising as high as $290 an ounce Tuesday in London. Gold dropped to $278.25 an ounce in London.
In currency trading overseas the dollar clawed back after Tuesday’s sell-off. The euro was trading at 90.66 cents on Wednesday after rising to 91.31 cents on Tuesday from 89.80 cents on Monday.
The yen eased slightly to 119.51 per dollar from 119.42 on Tuesday.
The Swiss franc, which soared against the dollar Tuesday, also pulled back. One dollar bought 1.66 Swiss francs Wednesday in Europe, up from 1.643 on Tuesday though still below Monday’s 1.689.
The Swiss franc has long been considered one of the world’s strongest currencies and thus a safe haven in times of global turmoil.
“It’s been pretty textbook,” said Tim Mazanec, director of Investors Bank and Trust Co. in Boston. “We’ve seen flows straight to the Swiss franc” as some investors sought to move their money out of the United States.
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How Foreign Stock Markets Fared
Here is a look at the gains or losses in key foreign stock indexes Tuesday and Wednesday. Note that Asian markets had closed Tuesday before the terrorist attacks on the United States occurred.
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Pctg. change: Latest Country/index Tues. Wed. close Britain/FTSE-100 -5.7% +2.9% 4,882.10 Brazil/Bovespa -9.2 +2.6 11,113.50 Germany/DAX -8.5 +1.4 4,335.15 France/CAC-40 -7.4 +1.3 4,114.26 Italy/MIB-30 -7.8 +0.9 29,357.00 Spain/IBEX -4.6 +0.1 7,336.70 Japan/Nikkei-225 +1.0 -6.6 9,610.10 Hong Kong/Hang Seng +0.5 -8.9 9,493.62 Canada/TSE-300 -4.0 closed 7,048.80 Mexico/IPC -5.6 closed 5,531.02
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Source: Bloomberg News
