European shares recover on big Wall Street gains

Bank stocks jumped Friday after several eurozone countries banned short selling, helping European markets push higher Friday ahead of expected further gains on Wall Street.
The advance in Europe follows big gains in the U.S. Thursday, which helped support most stocks in Asia.

However, wild swings over recent days, with shares often changing direction every few hours, highlight how volatile trading is at the moment amid concerns over the global economy and the levels of debt in both the U.S. and Europe.

In Europe, London's FTSE 100 rose 1.4 percent to 5,234 points, while Germany's DAX was 2.3 percent higher at 5,933. The CAC-40 in France gained 2.3 percent to 3,154 even after data showed the French economy did not grow in the second quarter.

Wall Street was also poised for a a higher open after Thursday's big gains — Dow futures were up 0.6 percent at 11,147 while futures for the broader Standard & Poor's 500 index rose 0.7 percent to 1,176.

The gains in Europe came after regulators in France, Italy, Spain and Belgium imposed temporary bans on short-selling of financial shares late Thursday, following sharp selloffs and temporary gains in French bank shares in particular that they said were fueled by false rumors.

The share prices of French banks, which fluctuated sharply in recent days appeared to stabilize Friday, with Societe General up 3 percent and Credit Agricole up 1.3 percent. Belgium's Dexia was doing particularly well, trading 14 percent higher.

However, analysts questions whether the short-selling banks would be successful in the long run, since many experts claim that a similar move in 2008 actually contributed to investor uncertainty.

"With deteriorating investor confidence in eurozone debt likely to continue driving reduced investor confidence in European banks' ability to withstand the fallout from the euro-zone debt crisis; we doubt that downward pressure on European financials will now dissipate," said Lee Hardman, an analyst at Bank of Tokyo-Mitsubishi UFJ.

The gains in Europe came despite figures showing France's economy unexpectedly ground to a halt in the second quarter on the back of a sudden reversal in consumer spending and stagnation by the country's exporters.

The halt in the French economy is set to exacerbate concerns over the eurozone in general, where the three bailout countries of Greece, Ireland and Portugal are in recession and Italy and Spain struggle with lackluster growth. Data also showed that Greece's economy shrank 6.9 percent in the second quarter from the year before.

France is already facing speculation that it may soon lose its AAA-rating due to its high debt load.

"With the economy stagnating and elections coming up next spring, it will be extremely difficult to implement the aggressive austerity measures that are needed to convince markets that the government finances are on a stable footing," said Jennifer McKeown, senior European economist at Capital Economics.

The euro was also seemingly unaffected by the French and Greek data, trading 0.3 percent higher at $1.425.

Earlier in Asia, the session was far less volatile than of late.

Hong Kong's Hang Seng added 0.1 percent to 19,620.01. Australia's S&P/ASX 200 gained 0.8 percent to 4,237.90, while benchmarks in New Zealand and Singapore also rose.More...