European stock markets closed higher yesterday in a technical rebound boosted by better-than-expected US consumer confidence figures after sustained losses on concerns over the deteriorating situation in Libya.
Dealers said a bounce back was not surprising after a difficult week when soaring oil prices, driven by growing unrest in Libya and across the Middle East, stoked fears inflation will rise sharply and sent investors looking for safety.
Profit-taking left oil prices well off their highs, allowing some calm to return to the market even as there appeared to be a growing risk of civil war in Libya as leader Muammar Gaddafi vowed again to fight to the end. The dollar, under pressure too, turned firmer yesterday as US consumer confidence picked up in February, a key measure for the economic outlook, helping offset figures showing a slowdown in growth in the last three months of 2010.
In London, the FTSE 100 index of leading shares gained 1.37 per cent to 6,001.20 points. In Paris, the CAC 40 put on 1.51 per cent to 4,0760.38 points and in Frankfurt the DAX added 0.77 per cent to 7,185.17 points. In New York, the blue-chip Dow Jones Industrial Average was similarly higher, adding 0.24 per cent at around 1700 GMT, while the tech-rich Nasdaq Composite rose 0.96 per cent.
Kimberly DuBord at Briefing.com said the market’s perspective had shifted back to the United States after several days of weakness related to the pro-democracy contagion spreading throughout the Arab world.
“Softening oil prices are helping to refocus sentiment toward the ongoing economic recovery, which, coupled with a healthy corporate sector and attractive valuations, continues to underscore investor interest in stocks,” Ms DuBord said.
There was “a modest reaction” to a downward revision to US economic growth in the final quarter of 2010, Charles Schwab analysts said in a client note.
The US economy grew 2.8 per cent, sharply below an initial estimate of 3.2 per cent in the fourth quarter as lower government spending and inventory investment bit into the recovery.
However, a strong report on consumer confidence from the University of Michigan, with the highest reading since January 2008, helped restore momentum.
In London, GFT analyst David Morrison said investors were bargain-hunting after losses earlier in the week “but there’s still plenty to worry about, with the possibility of civil unrest spreading further to the Middle East. “Any further rise in the oil price will weigh on equities but bear in mind that at current levels it is already a serious drag on growth,” Mr Morrison added. London managed to finish in positive territory despite weak fourth quarter growth figures and a technical glitch which prevented trade in the morning.
In Paris, Frank Wattecant, dealer at Global Equities, said overall good company results “helped confidence on the market”.
On the foreign exchanges, the euro fell to $1.3756 in late London trade from $1.3797 in New York later Thursday, while the dollar was slightly easier at 81.74 yen from 81.91 yen. Gold continued near record highs above $1,400 but on the day was down at $1,402.50 an ounce from $1,411.50 on Thursday.