Global stocks see-sawed in volatile trading yesterday, after a G20 pledge to tackle eurozone debt and fight threats of new global recession and rumours that the ECB would provide troubled banks even stronger support.
After morning gains and steep afternoon losses, London’s FTSE-100 index closed up 0.50 at 5,066.81 points, while in Frankfurt the DAX, which dropped below the key psychological level of 5,000 points during the trading session, posted a gain of 0.63 per cent to 5,196.56 points.
In Paris the CAC 40 rose 1.02 per cent to 2,8010.11 points with beleaguered banks Société Générale and BNP Paribas up more than seven per cent.
Elsewhere in Europe, Madrid rose by 2.12 per cent, Milan by 1.36 per cent, Lisbon by 0.98 per cent, Zurich by 0.20 per cent, Brussels by 0.93 per cent and Amsterdam rose 0.49 per cent.
US stocks also ended their downward slide, with the Dow Jones Industrial Average up 0.3 per cent to 10,761.64 points. The broader S&P 500 rose 0.69 per cent to 1,137.38, while the tech-heavy Nasdaq Composite climbed 1.16 per cent to 2,484.15.
The euro rose slightly to $1.3511 from $1.3466 on Thursday, when it struck an eight-month low point of $1.3385.
The euro also nudged up to 103.14 yen from 102.60 on Thursday, when it also hit a 10-year trough of 102.22.
The dollar rose against the yen to 76.34 from 76.20 yen on Thursday.
Yields on 10-year German government bonds briefly fell to a new record low of 1.640 per cent on safe-haven sentiment before ending the day at 1.745 per cent. US benchmark bond yields also hit a record low at 1.671 per cent before rising to 1.778 per cent.
Michael Hewson of CMC Markets in London said bank shares rose on “vague talk that policymakers might be considering boosting the (eurozone rescue fund) EFSF” after Dutch central banker, and European Central Bank member Klaas Knot “suggested that it would need to be increased in excess of one trillion euros or more”.
Mr Hewson added that a pledge by 20 finance ministers that they will implement a full timetable for a rescue plan by the Cannes G20 summit in six weeks also boosted sentiment.
“The truth is until we see what, if anything comes out of this weekend, sentiment is likely to remain fragile,” he said.
The Group of 20 major economies yesterday vowed to mount a powerful response to the rising challenges facing the world economy as it reels from the fast-moving debt crisis in the eurozone.
The pledge, made in an unexpected statement, came after world leaders ramped up pressure on Europe to take decisive action to contain its debt crisis as markets spun out of control.
It failed to calm Asian markets, however, which plummeted for a second day as the dollar rose against regional currencies.
Seoul slumped by 5.73 per cent, Hong Kong by 1.32 per cent, Sydney by 1.56 per cent, Taiwan fell 3.55 percent, while Shanghai lost 0.41 per cent. Tokyo was closed for a public holiday.
“G20 finance ministers passed up a golden opportunity to soothe the markets as talk of tackling the financial crises fell short of any decisive action,” said ETX Capital trader Manoj Ladwa.