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European stocks rebound at end of brutal week

European stocks rebound at end of brutal week

LONDON: European stocks rebounded Friday on higher oil prices and solid German economic growth, regaining some ground lost this week on fears of a global recession.

Frankfurt, London and Paris all rose by nearly 2.0 percent, brushing off another slump in Asia, as investors welcomed news that the German economy grew by a solid 0.3 percent in the fourth quarter.

World oil prices meanwhile climbed on fresh hopes of an OPEC output cut, one day after tanking towards 13-year lows on the stubborn crude supply glut.

Europe’s main stock markets were buoyed also by bargain-hunting after another calamitous day on Thursday, when Frankfurt shed 2.9 percent, Paris slumped 4.1 percent and London dived 2.4 percent.

Markets were slammed this week by global economic fears centred on China, banking jitters and questions over the impact of the European Central Bank’s quantitative easing (QE) stimulus, dealers said.

“European markets… have been hit by a whole series of negative factors this week not only global recession fears and general solvency concerning banks, but by increasing evidence that QE by the ECB does not seem to work — or that it has not had the desired effect so far,” said Markus Huber, analyst at brokerage Peregrine & Black in London.

“Some traders also point out that unlike in 2008/2009, major central banks have only limited tools and measures available to support global growth,” he told AFP.

Huber added that, during the notorious global financial crisis, the world’s central banks had greater scope because interest rates were far higher and liquidity was far lower.

The London stock market was meanwhile propelled higher Friday also on investor relief that British engine maker Rolls-Royce had not scrapped its shareholder dividend.

Rolls-Royce, which did however cut the payout for the first time in almost 25 years, saw its share price rocket 13.3 percent to 600.5 pence, topping the FTSE 100 leaderboard.

However, the global sell-off showed no sign of ending in Asia.

A near five-percent plunge in Tokyo led another rout, bringing to an end one of the most painful weeks for global investors as fears about the world economy and possible recession stalked trading floors.

‘Very real’ fear of recession

“The fear of a global recession is very real,” said Craig Erlam, senior market analyst at Oanda trading group.

“It does feel like a culmination of factors that have built up over the last seven years are finally coming together to test just how far the global economy has come and how strong the recovery truly is,” he told AFP.

“This is going to be a very challenging year for the global economy and I think the risk of recession is higher now than it has been for some time.”

Friday’s losses in Japan came after the yen, viewed as a haven investment, hit 16-month-plus highs against the dollar.

The dollar had Thursday struck 110.99 yen, which was the lowest level since October 2014.

The rise led Tokyo to say it would take “appropriate” measures, fuelling speculation officials were considering a currency market intervention.

Analysts say there is growing concern central banks are running out of ideas to provide support, with Sweden’s saying it would push its interest rate further into negative territory, weeks after Japan adopted the policy for the first time.

The measure effectively charging lenders to park cash with it follows similar moves by the ECB and Switzerland.

And while Federal Reserve boss Janet Yellen told congress Thursday it was unlikely the US would also need to adopt such extreme measures, she did leave open the possibility.

London – FTSE 100: UP 1.7 percent at 5,628.3 points

Frankfurt – DAX 30: UP 1.8 percent at 8,909.4

Paris – CAC 40: UP 1.7 percent at 3,963.8

Milan – FTSE MIB: UP 3.6 percent at 16,339

EURO STOXX 50: UP 2.1 percent at 2,736.1

Tokyo – Nikkei 225: DOWN 4.8 percent at 14,952.6 (close)

New York – Dow: DOWN 1.6 percent at 15,660.2 (close)

Euro/dollar: DOWN at $1.1283 from $1.1323 on Thursday

Dollar/yen: UP at 112.57 yen from 112.39 yen

Copyright AFP (Agence France-Presse), 2016

Courtesy : BRecorder



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