Thursday, August 11, 2011

World stocks stabilize after battering and euro rises

World stocks edged up on Thursday from this week's 11-month low as higher U.S. stock futures calmed frayed investor nerves after a steep selloff, and the euro also rose.
But markets remained jittery and the dollar briefly jumped above 77.00 yen, triggering talk about possible intervention. But dealers reported no action from Japanese monetary authorities and it quickly fell back to 76.65.
Fast-moving rumors about a sovereign rating downgrade of France as well as talk doubting the health of French banks swirled in Europe, causing the biggest widening in the benchmark index of European credit default swaps on Wednesday since the credit crunch in 2008.
The three major rating agencies later reaffirmed France's AAA rating, and said its outlook was stable, but markets remain concerned that French banks are among the most exposed to a worsening of Europe's government debt crisis.
Investors remained reluctant to place long-term bets as trading remained whippy, especially as concerns persisted about the U.S. economic slowdown and uncertainty lingered over how Europe would tackle a sovereign debt crisis that is threatening its banking system.
The MSCI world equity index was up 0.4 percent while European stocks rose 1.3 percent.
The benchmark MSCI index had slipped into bear market territory earlier this week by falling more than 20 percent from its three-year high in May, but has since inched up.
"The fact that the bears were unable to push markets down to test Tuesday's lows yesterday may also give the bulls more confidence on the open but any gains may be again short lived as markets still remain negative whilst bullish cues are short on the ground," said Jonathan Sudaria, dealer at Capital Spreads.
Emerging stocks rose 0.3 percent, also off this week's 11-month low.
U.S. crude oil rose 1.2 percent to $83.82 a barrel.
Bund futures rose 27 ticks, illustrating still strong appetite for safe-haven assets.
The dollar fell 0.2 percent against a basket of major currencies. The U.S. currency has been under pressure from speculation the Federal Reserve may launch a third bond-buying program to bolster the economy. It has pledged to keep interest rates near zero for two more years.
The yen also briefly fell overnight against the dollar on comments by Japanese Finance Minister Yoshihiko Noda that he would work closely with the global community to maintain market stability.
The euro rose 0.8 percent to $1.4270.More...

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