European stock markets closed sharply higher yesterday after a strong Wall Street offset fresh falls in Asia and nervous investors kept a wary watch on Japan’s nuclear crisis, dealers said.
They said solid US data on jobs and manufacturing bolstered the case for economic recovery, helping Europe out of the doldrums as Asia struggles with the demons unleashed by last Friday’s massive earthquake in Japan.
Uncertainties over the situation in Libya added to the mix, pushing oil prices up again while the yen hit record highs against the dollar on the view Japanese companies will sell offshore assets to fund reconstruction at home.
“Market sentiment remains nervous given the uncertain situation in Japan,” VTB Capital economist Neil MacKinnon told AFP.
Global stock markets have tumbled as investors struggle to get a line on the impact of Friday’s 9.0-magnitude earthquake and massive tsunami in Japan.
“The volatility will remain for a while as the market is moving on each headline that comes out from Japan,” said equities head Atif Latif at Guardian Stockbrokers.
In New York, stocks rebounded after three days of falls, with the blue-chip Dow Jones Industrial Average gaining 1.20 per cent at around 1700 GMT while the tech-heavy Nasdaq Composite was up 1.32 per cent. Scott Marcouiller at Wells Fargo Advisors said the market could get a sharp boost if Japanese efforts to restore electricity to the stricken Fukushima nuclear plant were successful as that would allow them cool down the reactors.
The market got an early helping hand from news that new claims for US unemployment benefits fell four per cent last week, pointing to continued improvement in the labour market.
In London, the FTSE 100 index of leading shares closed up 1.75 per cent at 5,696.11 points. In Paris, the CAC 40 jumped 2.43 per cent to 3,786.21 points and in Frankfurt the DAX gained 2.20 per cent to 6,656.88 points.
Other European markets posted similar sharp gains.
“Equities are bouncing ... as traders regroup after days of relentless selling,” said analyst David Morrison at GFT Global in London.
“Everyone is focused on the news coming from Japan where the battle to contain the damage at the Fukushima nuclear facility continues.
“The latest reports claim that power lines have been established which should help the emergency workers but there is widespread confusion ... and the accuracy of official reports has been questioned.”
On the currency markets, the dollar recovered some lost ground against the yen, trading at 78.89 yen in late London deals, up from 76.36 yen at around 2115 GMT on Wednesday, which was the lowest since the end of World War Two.
The euro was at $1.4017, up from $1.3906 in New York late Wednesday.
Group of Seven finance heads were set to hold telephone talks on Friday as market talk grew that Tokyo might be preparing measures to rein in the yen.
“There is intensifying market speculation the Bank of Japan will soon intervene to cap support of the yen,” NAB Capital analyst David de Garis said.
Gold, the traditional safe-haven investment was little changed at $1,403.75 an ounce after Wednesday’s finish at $1,402.
Bond markets were weaker as investors, feeling slightly more confident, bought back into stocks. The benchmark 10-year German government bond was at 3.168 per cent, up from 3.089 per cent Wednesday, reflecting the fall in price.
In Asian trade earlier yesterday, markets fell back as the news from Japan cast a shadow but hopes that the authorities might make some progress in controlling the crisis and more Bank of Japan liquidity support trimmed losses.
Tokyo lost 1.44 per cent, having been down more than four per cent at one stage, with exporters badly hit by the spike in the yen.
Hong Kong fell 1.83 per cent and Shanghai shed 1.14 per cent but Sydney ended flat even though uranium miners slumped.