European share prices rebounded yesterday on positive US retail sales data after losing ground on fears for the financial health of the eurozone, which sent the euro tumbling against the dollar.
Markets were riveted on Ireland, which said it was in contact with international partners while insisting it had not sought a financial rescue package to help it pay its debts.
The fate of two other financially strapped eurozone states, Greece and Portugal, also weighed on sentiment.
Greece warned that its public deficit this year would likely come to 9.4 per cent of output, rather than the 8.1 per cent target it had agreed to meet in order to secure an IMF-EU bailout in May.
The Portuguese Finance Minister, Fernando Teixeira dos Santos, said his country was at a high risk of needing a rescue due to the danger of contagion from other debt-hit euro nations.
Adding to the turmoil and uncertainty, the European Union’s executive commission said Ireland’s difficulties could indeed have an impact on the financial stability of the euro area as a whole.
In such an atmosphere, European stock exchanges were under pressure until mid-afternoon when data showed US retail sales rose a far better than expected 1.2 per cent in October. The London FTSE 100 index added 0.41 per cent to close at 5,820.41 points while in Paris the CAC 40 gained 0.86 per cent to 3,864.24 points. In Frankfurt, the DAX added 0.82 per cent at 6,790.17 points.
Elsewhere there were gains of 0.79 per cent in Milan, 1.20 per cent in Madrid, 0.89 per cent on the Swiss Market Index and 0.68 per cent in Amsterdam.
“The good figure concerning retail sales in the United States made gains possible and it was also thought that anxiety surrounding the debt of certain European countries has probably been exaggerated,” said Arnaud de Champvallier of Turgot Asset Management.
US stocks advanced on the retail sales data.
The blue-chip Dow Jones Industrial Average was up 0.41 per cent at 11,238.29 points while the tech-rich Nasdaq gained 0.11 per cent to 2,521.09.
“All in all, the retail sales report is another key data point that suggests the US economy is on a growth path that holds potential to produce some positive surprises,” said Patrick O’Hare of Briefing.com.
The single European currency, however, fared much worse yesterday in the confusion surrounding measures that Ireland might or might not be taking to firm up its finances. The euro fell to $1.3615 from $1.3693 late on Friday in New York. The dollar was meanwhile at ¥82.85, up from ¥82.52 on Friday.
“The state of play... is that the Irish government is resisting pressure from the EU for a bailout,” said analyst Neil McKinnon of VTB Capital.
“While Ireland faces no immediate funding pressures, its banks are under pressure following the collapse of the Irish housing market, which has left the banks liable for loan defaults and EU policymakers seem to be worried that Ireland’s problems could spill over into the rest of the (eurozone’s weaker) economies.”
Asian stocks were mixed earlier yesterday as eye-catching growth data helped Tokyo shrug off worries about the eurozone.
Tokyo’s Nikkei index ended the day up 1.06 per cent but Sydney lost 0.10 per cent and Hong Kong dropped 0.81 per cent.
Shanghai rebounded 0.97 per cent, after slumping a dramatic 5.16 per cent on Friday, its biggest one-day fall in 14 months.
Tokyo was boosted by data showing Japan’s economy grew by 3.9 per cent in the July-September period from a year before, while the dollar’s stronger performance against the yen gave the all-important export sector a lift.