European stocks rebound but euro zone fears weigh

European stocks rebound but euro zone fears weigh

London: European stocks rebounded on Thursday as investors sought bargains after the previous day’s sharp sell-off but gains were limited by persistent euro zone fears, with the euro remaining under pressure.

Equity markets plunged on Wednesday and Bunds rallied after Germany unnerved investors by unilaterally banning naked short selling of certain financial stocks, euro zone sovereign debt and related transactions in credit default swaps.

The selloff brought out buyers in Europe on Thursday, with banks among the top performers. The FTSEurofirst 300 index of top European shares opened up 0.7%.

"It’s bargain hunting after yesterday’s falls, but volatility remains high," said Will Hedden, a sales trader at IG Index. "The markets did not take to the German ban and I would not expect to see people piling in too much as the risks to the downside are still very strong."

The June Bund future edged down 9 ticks but markets remained troubled by the general health of the euro zone and the lack of policy coordination amongst European members.

“The key negative is that the lack of unity suggests that there are cracks within the EU with regard as to how to deal with this crisis," said Gary Jenkins of Evolution Securities in a note.

World stocks as measured by the MSCI All-Country index were flat whilst the more volatile emerging markets index was down 0.75%.

“In the past few days we have seen good economic activity numbers and good momentum in economic readings but the market is more focused on financial stability risks and sovereign risks," said Murat Toprak, a strategist at Societe Generale in London.