European stock market gains, supported by positive US corporate results, were pared late yesterday when Wall Street weakened as investors awaited new signals on US prospects from the Fed head.
European trading was also tentative ahead of Friday’s release of the results of stress tests on 91 European banks to determine their financial health.
While ministers in several European countries have voiced confidence their banks would pass, analysts are warning that several lenders could be found to be under-capitalised and vulnerable to any fresh economic upheavals.
“The trend remains very fragile and dependent on Wall Street,” said analyst Yves Marcais of Global Equities.
In London, the London FTSE 100 index added 1.46 per cent to 5,214.64 points while in Paris the CAC 40 rose 0.75 per cent to 3,493.92 points. The Frankfurt DAX gained 0.38 per cent to 5,990.38 points.
Elsewhere there were gains of 0.76 percent in Milan, 0.15 per cent on the Swiss Market Index and 1.84 per cent in Amsterdam. Madrid fell 0.20 per cent.
US stocks traded lower yesterday. The blue-chip Dow Jones Industrial Average was down 0.18 per cent at 10,211.04 at mid-day, with the Nasdaq composite slipping 0.67 per cent to 2,207.70 points.
Investors were initially buoyed by excellent second quarter profits by Apple and better-than-expected earnings by top banks Morgan Stanley and Wells Fargo as well as soft drinks giant Coca Cola yesterday.
But the initial upbeat sentiment evaporated ahead of Federal Reserve Chairman Ben Bernanke’s testimony before the Senate yesterday.
“We expect him to reiterate the recent Fed policy statement that the Fed sees the economy recovering slowly and intends to maintain its current interest rate policy for an extended period,” said Frederic Dickson, chief market strategist for D.A. Davidson & Co.
“We expect him to be grilled on the Fed’s most recent forecast for economic growth in 2010 and 2011 and that unemployment rates will remain high,” he said.
IG Index Analyst Anthony Grech spoke of a “sense of excitement on the trading floors of the major markets ahead of today’s testimony from Ben Bernanke.
“Speculation is mounting that the Fed chairman is prepared to tell the Senate... that the Fed is willing to act to assist the economic recovery (further).”