World stock markets turned mixed on Monday as already nervous investors waited for Tuesday’s United States presidential vote, seen as a potential key turning point for handling of the financial crisis.
European markets had been much higher in early trade, picking up from strong gains in Asia, but then slipped back after an indifferent opening on Wall Street where the Dow Jones Industrial Average slipped a few points after gains on Friday of 1,57%.
“Presumably, a wait-and-see attitude has taken shape ahead of Tuesday’s presidential election,” said Patrick O’Hare, analyst at Briefing.com.
“Also … it stands to reason that investors are waiting to see if last week’s rally has some staying power or was simply a run that will bring sellers back at the higher prices,” he added.
In Europe at 2.45pm GMT, the FTSE 100 index of leading shares in London was down 0,23%, the CAC 40 in Paris was up 0,34% and the DAX in Frankfurt fell 0,10%.
In Asia earlier on Monday, Hong Kong closed up 2,75, Sydney added 5,06% and Singapore jumped 5%. Tokyo was shut for a public holiday.
“Markets remain jittery and a likely global recession should fuel further uncertainty going forward,” said Dresdner Kleinwort analyst Valentin Marinov.
Marinov said widely expected interest-rate cuts, led this week by the European Central Bank, should reassure investors but “we doubt that the bounce in sentiment will grow into a lasting recovery in risk appetite, however”.
“Fundamental data disappointments as well as worse-than-expected European bank earnings this week could put an early end to the cautious recovery in sentiment,” he said.
European markets were additionally hit by data showing that the worst financial crisis for generations had driven the EU economy into a recession and that growth be close to a standstill in 2009.
“The economic horizon has now significantly darkened as the European Union economy is hit by the financial crisis that deepened during the autumn and is taking a toll on business and consumer confidence,” said EU Economic Affairs Commissioner Joaquin Almunia.
Markets were eagerly awaiting Tuesday’s US presidential elections, with polls giving Democrat Barack Obama a sharp edge over Republican John McCain on the last day of campaigning.
“In the context of the current financial climate, it is possible that an Obama victory could well provide the necessary spark for optimism to return to the markets,” said Joshua Raymond, market strategist at City Index in London.
“The US election has historically sparked a surge in the markets, and given the circumstances of an impending Obama victory, you wouldn’t bet against history,” he added.
“With financial markets staying relatively stable, the focus this week will be on the raft of [interest] rate decisions and economic data scheduled for release,” noted Barclays Capital analyst David Woo.
Interest rate decisions were due on Thursday from the Bank of England and the European Central Bank.
Both are widely expected to slash borrowing costs because inflation is falling fast and the threat of recession is looming large, analysts said. — AFP