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World stocks bounce back from lows

World stocks bounce back from lows
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First Published: Tue, Jul 06 2010. 02 00 PM IST
Updated: Tue, Jul 06 2010. 02 00 PM IST
London: Investors boosted global stocks strongly on Tuesday and sold the dollar, lifting equities off six- and seven-week lows.
MSCI’s all-country world stock index was up 0.8 percent, with Europe putting in gains of around 1.5%.
The world index is still down more than 10% for the year. Stocks were weaker on Monday in response to data showing a slower-than-expected improvement in US employment.
Recovering on Tuesday, the FTSEurofirst 300 bounced back from six-week closing lows with a gain of 1.5% while Japan’s Nikkei closed up 0.8 percent%, coming off a seven-week low.
Emerging market stocks were up 1%.
“Markets are a bit oversold. The decline has been quite strong,” said Joost de Graaf, senior portfolio manager at Kempen Capital Management in The Netherlands.
“There are (also) hopes that second-quarter earnings will be OK and will lift some of the negative atmosphere.”
Investors are currently beset by concern that the global economic recovery is slowing enough to send some countries into a double-dip recession.
This is combined with nagging fears that the recovery seen so far is all down to government action, which may soon end.
“Awash with private sector debt (in its various forms), the world’s major economies may struggle to maintain their forward impetus once policy stimulus, both fiscal and monetary, is set on the path towards normalisation,” BNY Mellon said in a note.
“Early signs of ebbing momentum are of concern.”
Dollar hit
The more risk-friendly mood hit the dollar, which fell a third of a percent against a basket of major currencies.
It was particularly weak against the high-yielding Australian dollar, which rose more than 1 percent at one stage on cautiously optimistic remarks from the Australian central bank after it left interest rates unchanged as expected.
“The strength in the Aussie was somewhat surprising given the change in the RBA’s wording suggests it may keep interest rates lower for some time,” said Ulrich Leuchtmann, currency strategist at Commerzbank in Frankfurt.
“But risky assets are performing well, so there’s been a gradual return of risk appetite.”
The euro gained a third of a percent to $1.2580.
Euro zone government bonds sold off as a result of the rise in equities.
The 10- and 2-year benchmark yields rose two to three basis points.
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First Published: Tue, Jul 06 2010. 02 00 PM IST
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