European stock markets bounced back yesterday from sharp losses the previous day and the euro firmed against the dollar as the IMF and the EU moved to try to stabilise the Irish financial situation.
But analysts said sentiment remained unsettled, with investors waiting to see if Ireland would indeed agree to external financial assistance to shore up its battered banking sector.
Dublin is being pressed to accept help in order to dampen fears that its debt and deficit difficulties will increase pressure on other financially troubled eurozone members, notably Portugal, Spain and Greece.
Ireland today faces crisis talks with a delegation from the European Commission, the European Central Bank and the International Monetary Fund.
The high-profile mission will seek an “intensive engagement” to try and stabilise the nation’s deeply troubled banking sector, Finance Minister Brian Lenihan said yesterday.
Adding to market tension was speculation that China might seek to cool growth as inflation spikes higher, a move that could cut into export earnings for industrialised nations selling into the Chinese market.
In London yesterday, the London FTSE 100 index added 0.19 per cent to close at 5,692.56 points while in Paris the CAC 40 gained 0.79 per cent to 3,792.35 points. The Frankfurt DAX rose 0.55 per cent to 6,700.7 points.
Elsewhere there were gains of 0.37 per cent in Milan, 0.93 per cent in Madrid, 0.68 per cent in Amsterdam and 0.29 per cent on the Swiss Market Index.
“We recovered a bit from the sharp fall on Tuesday, thanks notably to rumours of international assistance that will soon be made available to Ireland for its banking sector,” said analyst Yves Marcais of Global Equities.
“But the situation is still worrying because of three key macroeconomic issues – the long-term management of the Irish banking sector and deficit, the steps by China to prevent the overheating of the economy and the future of US monetary easing.”
Wall Street stocks were mixed after Tuesday’s slump, helped by news that Ireland could be nearing a bailout plan.
In the United States, data showed a slower than expected rise in the cost of living in October and a slump in housing starts, as the effects of the economic downturn continued to be felt.
The blue-chip Dow Jones Industrial Average was flat at mid-day, with the tech-heavy Nasdaq up 0.49 per cent.
“The euro-area concerns are being somewhat soothed as Ireland agreed to work with European officials to analyse its financial situation,” said analysts at Charles Schwab.
The euro too drew strength from the day’s cautious optimism, with the single currency in late-day trade at $1.3540 against $1.3488 late last Tuesday.
The dollar meanwhile slipped to 83.17 yen from 83.28 on Tuesday.
“Comments by various eurozone finance ministers ... seemed to suggest that we may be gradually nudging closer to an agreement on a rescue package for Ireland and its troubled banks,” said Valentin Marinov of Citigroup.