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Global stock markets stage rebound
2008-10-28
LONDON (AFP) - Global stock markets rebounded Tuesday as investors hunted for bargains after days of massive losses and took heart from prospects for a cut in US interest rates. Wall Street rallied at the open Tuesday, with the Dow Jones Industrial Average jumping 2.57 percent to 8,385.80 points in the first 10 minutes after Monday's late sell-off that pushed blue chips down more than 200 points. The tech-heavy Nasdaq gained 2.77 percent to 1,547.59 points. The gains came as the US Federal Reserve was set to begin a two-day meeting expected to deliver another cut in interest rates to help boost flagging growth and ease a credit crisis. Some analysts expect the US cut to be followed by reductions by other central banks. Patrick O'Hare at Briefing.com said the market "is due for a bounce after sliding 14 percent in the past five sessions alone. "For now, the trading tone is positive but given the market's frenetic ways of late, it remains difficult to place a lot of confidence in the thought that the positive bias won't be challenged," he warned. Asian equities bounced back, led by Hong Kong where stocks rocketed 14.4 percent, making up virtually all of the previous day's losses. In Europe, Frankfurt was up 8.32 percent in mid-afternoon trade, with carmaker Volkswagen boosted as Porsche prepares to take over the company. London jumped 3.42 percent and Paris was up 2.68 percent in volatile trading amid continued worries about the ailing global economy. "Rallies like this are to be expected in bear markets but there need to be a number of other indications that show a bottom in equity prices has been hit," said Capital Spreads managing director Simon Denham in London. "Whilst it is incredibly difficult to predict what happens in the future, the general rule of thumb is that equity prices hit a bottom about two to three quarters before the economy comes out of a recession. "With many predicting this recession to be a long and hard one, it's a brave investor who piles into equities now believing that we'll be back in positive growth territory at the end of 2009." It emerged last week that Britain's economy shrank in the third quarter of 2008 for the first time in 16 years, stoking fears of a global recession -- which is defined as two successive quarters of negative economic growth. Elsewhere on Tuesday, Tokyo finished with a gain of 6.4 percent as the yen fell sharply and investors picked up bargains after the Nikkei index had hit a 26-year low. Seoul rose 5.6 percent and Shanghai firmed 2.8 percent. "The equity market was massively oversold and a rally was due," said RBS Securities analyst John Richards. But some Asian markets missed out on the advance, with Sydney ending down 0.4 percent. In the foreign exchange arena, the euro rallied from two-year lows against the dollar as firm stock markets turned investors away from the US currency, dealers said. The euro rebounded after briefly hitting 1.2328 dollars, its lowest since April 2006. The single currency advanced to 1.2490 dollars, compared with 1.2471 late in New York on Monday. The yen meanwhile eased back from multi-year high points against the euro and the dollar, providing some welcome respite for Japanese exporters who are feeling the pain of a strong currency. Some analysts warned markets could fall further before reaching a bottom. "Global equities will trend downwards until they reflect a deep global recession," said Dariusz Kowalczyk, chief investment strategist at CFC Seymour in Hong Kong. "As long as US equities are going down, so will all other stock markets," he warned.
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