/ 9 June 2006

World markets rally after heavy losses

Global stock markets advanced on Friday as bargain hunters snapped up shares after a turbulent week of sharp losses, the result of concerns about rising inflation and interest rates.

European stock markets recovered some ground on Friday, following Thursday’s massive sell-off, and after a steadier overnight performance on Wall Street.

Asian stocks also moved higher after another round of dizzying declines.

Equities had been in a downward spiral since Monday, when United States Federal Reserve chairperson Ben Bernanke delivered an unexpectedly strong inflation warning, which investors took as a sign that the Fed was not yet done with its series of US rate hikes.

But some dealers are beginning to take the view that the sell-off has been excessive.

”What equity markets fear is a material loss in earnings momentum if the Fed continues to raise rates,” said Mike Lenhoff, analyst with Brewin Dolphin.

”Our judgement is that there will not be a material loss in earnings momentum.

He added: ”Those who share our sentiments should look on the present as a buying opportunity.”

In Friday’s European trading, the French CAC 40 index of leading shares won 1,53% to 4 756,15 points.

The Paris market had tumbled by 2,91% the previous day to 4 684,3 points — the lowest finish since the end of 2005.

Frankfurt’s DAX 30 won 1,36% to 5 456,48 points on Friday, after plunging 2,90% on Thursday.

Meanwhile London’s FTSE 100 index jumped 1,33% to 5 637 points, having slumped by 2,51% the day before.

The DJ Euro Stoxx 50 index of leading eurozone shares, meanwhile, leapt by 1,36% to 3 509,33 points on Friday.

The euro stood at $1,2659.

In Wall Street on Thursday, US shares had clawed their way back from heavy losses and finished mixed after a White House forecast on US economic growth eased market jitters about a sharp slowdown.

Japanese share prices on Friday broke a four-day losing streak after a jump in domestic machinery orders provided much-needed relief to investors sweating over US inflation, dealers said.

In London, mining stocks led the charge after a bloodbath the previous day, which was brought on by the falling price of metals such as copper and gold.

The share price of Xstrata jumped 3,97% to 1 887 pence, Kazakhmys leapt 2,83% to 1  034,5 pence and Anglo American soared 3,14% to 1 903 pence.

Across in Frankfurt, shares in ThyssenKrupp, the German steel and heavy industry giant, climbed by 3,18% to €24,69.

And in Paris trading, European steelmaker Arcelor rose 4,52% to €33,55.

In US trade on Thursday, the Dow Jones Industrial Average, after falling 173 points in early trade, managed a gain of 0,07% to close at 10 938,82 points.

The other main indexes also erased big losses, but ended mixed.

The tech-heavy Nasdaq composite finished down 0,30% at 2 145,32 points after sliding more than 40 points.

The broad-market Standard and Poor’s 500 index eked out a gain of 0,14% to 1 257,93 points after trading down more than 20 points.

In Asia on Friday, Tokyo’s benchmark Nikkei-225 index finished 0,81% higher at 14 750,84 points, a day after slumping below 15 000 points for the first time in six months on worries about rising US rates.

Hong Kong’s key Hang Seng Index closed 1,16% higher at 15 628,69 points on a technical rebound led by China Mobile and HSBC after three straight days of falls. – Sapa-AFP