European shares snap five-day fall
European shares closed 2.2 per cent higher per cent yesterday, snapping a five-day losing run as Volkswagen rocketed again on short-covering but losses in banks took the shine off the market's earlier surge. The FTSEurofirst 300 index of leading...
European shares closed 2.2 per cent higher per cent yesterday, snapping a five-day losing run as Volkswagen rocketed again on short-covering but losses in banks took the shine off the market's earlier surge.
The FTSEurofirst 300 index of leading European shares ended 2.2 per cent higher at 834.36 points, having risen to a day's high of 851.17.
The index has lost about 45 per cent in value so far this year, whipped by a credit crisis that has pushed the world economy to the brink of recession.
"There is the potential for a sizable rebound... In bear markets we have seen sizable rebounds in the past," said Bernd Meyer, head of pan-European equity strategy at Deutsche Bank in London.
"(But) as long as investors are not sure where the macro-economy is heading... the market will have a problem seeing a sustained upswing."
Volkswagen surged more than 80 per cent, adding to a 146 per cent rise the day before, as short sellers continued to pile into the stock on news at the weekend that Porsche had bought up much of VW's remaining free float.
VW briefly became the world's biggest company by market value yesterday. Porsche was up 9.9 per cent.
"We're in a market full of anomalies at the moment," said Graham Secker, UK equity strategist at Morgan Stanley in London.
"The mispricing everywhere is quite extraordinary," he added.
Banks took a fresh beating. Shares in French bank Société Générale slumped for a second day in a row, down more than 12 per cent as traders cited a possible exposure to the share price surge at Volkswagen.
The European banks sector lost 3.5 per cent, with BNP Paribas off 10.4 per cent, Credit Agricole down 13.4 per cent and Deutsche Bank shedding 13.3 per cent. Asia-focused bank Standard Chartered rose 2.9 per cent, after saying it made good progress in the third quarter of 2008 despite slower economic growth in the region, and reassured on its capital strength. London-listed Standard Chartered generates two-thirds of its revenues in Asia.
Across Europe, Britain's FTSE 100 was up 1.9 per cent, Germany's DAX was up 11.3 per cent, boosted by Volkswagen, and France's CAC-40 was up 1.6 per cent.
US stocks also rose. The US Federal Reserve was to begin a two-day interest-rate policy meeting later yesterday, and investors expected the Fed to cut rates - now at 1.50 per cent - by at least a further 50 basis points.
In Europe heavyweight stock BP rose 5.4 per cent after it reported a 148 per cent rise in third-quarter replacement cost profit, at $10.03 billion, boosted by higher oil prices.