London: European and Asian equity markets mostly beat a path to higher ground on Wednesday, but falls in Tokyo, Hong Kong and London took the shine off a US-led rebound from a week of huge losses.
Dealers said trade remained cautious given the recent beatings—both Tokyo and Hong Kong ended in the red after early gains—and as they decided whether the worst was over and if they could return to normal business.
US treasury secretary Henry Paulson continued to talk up the health of the worldeconomy, while analysts said the bright economic outlook in Europe could help investors shake off the recent heavy downturn.
“Despite recent problems in financial markets, and some fairly mixed economic data in the US, economic prospects in both the euro area and the UK are bright,” ABN Amro analyst Dario Perkins said.
“The major European economies are still growing at an above-trend pace.”
In Europe, on Wednesday, Frankfurt and Paris markets climbed, but London shares eased as many companies’ shares went ex-dividend. This meant that new shareholders would not be entitled to the most recently declared dividend.
In late morning trading, London’s FTSE 100 index of leading shares fell 0.04% to 6,136.30 points. But in early afternoon deals, Frankfurt’s DAX 30 climbed 0.16% to 6,605.77 points and in Paris the CAC 40 advanced 0.14% to 5,444.86.
Other European markets chalked up positive gains. Shares were up 0.62% in Zurich, 0.61% in Madrid and 0.39% in Amsterdam. In Asia, the main indices rose for the second day straight in Shanghai, Sydney and most other markets. Tokyo and Hong Kong went down.
Wall Street’s strong rally on Tuesday bolstered the sentiment, dealers said, but theyadded that the gains may be capped by profit-taking as many investors are stilluncertain about the global market outlook.
Analysts said shares were likely to continue a period of adjustment following the recent rout sparked by worries about the slowing US economy and China’s rapidly rising stock market.
“Because of the falls, valuations have come down to levels that are much more comfortable,” said Lorraine Tan, head of Asian equity research at Standard and Poor’s in Singapore.
“I think at the current levels, definitely the market can be sustained. It just needs to consolidate for a little while longer. We feel that economic fundamentals are intact and I think we can see a resumption of the upswing after this,” she added.
In Shanghai, the composite index closed up 1.99%, continuing a recovery after a week-long slump that roiled markets around the world.
After dipping in and out of the red, Tokyo closed down 0.47% on Wednesday and Hong Kong lost 0.73%, while Sydney ended up 0.93%.
Elsewhere in Asia, shares were up 0.57% in Seoul, 0.40% in Taipei and 0.72% inWellington.
Ben Kwong, research head at KGI Asia in Hong Kong, cautioned that further gains were likely to be limited for now.
“The market was firmer due mainly to continued bargain-hunting...but I don’t expect very sharp upside momentum as investors are cautious amid the volatility,” Kwong said.
Meanwhile, Paulson maintained his upbeat economic outlook during his tour of Asia, saying he feels “very comfortable” with the strength of the world economy. AFP
“What I have been making very clear is that we have a very strong global economy,” he told reporters during a brief visit to South Korea en route to China.