LONDON, April 21 — European shares bucked the global trend today, rising despite renewed fears about banking credit and keeping up hopes that a global equity rally would continue.
World stocks as measured by MSCI were down 0.3 per cent, adding to a more than 3 per cent loss yesterday. They were mainly hit by Asia, where Japanese shares lost 2.39 per cent.
European equities gained, with the FTSEurofirst index up 0.5 per cent.
Driving early sentiment today was a steep loss on Wall Street overnight. Bank of America greatly increased its reserves for non-performing assets, raising uncertainties about future writedowns at a time when investors are already worried about the outcomes of stress tests on the US banking industry.
This raised concern in some quarters that a sharp rally in global stocks since early March was about to end.
Before this week, world stocks rose for six weeks in a row, gaining close to 30 per cent. But European shares suggested there may be some life left in the rally. They were particularly lifted by signs of resilience from the world’s third largest retailer, Tesco which posted bumper profits.
“One day of a major correction does not break a trend, especially the ferocious rally of the past six weeks,” Dariusz Kowalczyk, chief investment strategist with SJS Markets in Hong Kong, said in a note.
“But we do expect a more substantial return to the risk aversion trade some time in the near term, most likely in relation to the US bank stress test results.”
EURO RECOVERS
The euro rose after hitting one-month lows against the dollar and yen as investors took profits but gains were limited as investors remained wary of more corporate earnings results and the health of banks.
The euro was up 0.2 per cent against the dollar at US$1.2947, but was not far from a one-month low of US$1.2888 hit on EBS yesterday. It was up 0.2 per cent at 126.77 yen.
The dollar was flat at 97.94 yen, up from a three-week low of 97.66 yen hit yesterday.
Euro zone government bonds rose.
Two-year bond yields were 5 basis points lower at 1.412 per cent and 10-year yields were 3 basis points lower at 3.108 per cent.
“The bank earnings aren’t as good as some of the headline figures might suggest,” said a trader. — Reuters
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