A revamped version of Washington's $700 billion bailout package is heading for a vote in the US Senate Wednesday evening, causing European stocks to rise mid-day. The US House of Representatives thwarted the first plan in a surprising move on Monday.
Find out more about the origins of the greatest financial crisis in decades and watch Professor Gerardo Della Paolera explain how we got there.
European shares rose early on Wednesday with banks the major gainers on hopes the U.S. Senate will pass a new version of the $700 billion banking bailout package later in the day.
By 0852 GMT the FTSEurofirst 300 index of top European shares was up 1 percent at 1,074.04, adding to its 1.6 percent gain on Tuesday.
Banking stocks were the top weighted risers on the index. Barclays, UniCredit, Royal Bank of Scotland, Credit Agricole and HSBC were 0.7-6.2 percent higher.
The U.S. Senate will vote on Wednesday night on a new version of the $700 billion bailout package for Wall Street, rekindling hopes that the credit crisis can be stemmed before claiming yet more banks and causing further damage to the global economy.
"The market is all about confidence and investors need to just hang in there and not be swayed by different rumours," said Justin Urquhart Stewart, director at Seven Investment Management.
"The worrying sign is that this is based on no more than a hopeful optimism without much basis to it at the moment. This is the eye of the storm until we wait for the decision from the U.S. Senate and see how the restructuring takes place."
Eurogroup Chairman Jean-Claude Juncker said European Union countries will not let any big bank fail during the financial crisis, on Wednesday, adding that the repercussions of the turmoil would be felt for months. In the UK, the government is considering matching an Irish move to guarantee all bank deposits in response to the global credit crunch, the Daily Mail newspaper quoted unamed government sources as saying.
Jim Wood-Smith, head of research at Williams de Broe said: "The Irish government guaranteeing all deposits sets a challenge to other coutnries. There is no logic to hold a deposit in a UK bank when people can put it in an Irish bank and have their deposit guaranteed."
The FTSEurofirst 300 lost 11 percent in September, making it the second-worst month of the year, and the index is down 29 percent in 2008, punctured by a credit crisis that has piled up losses at banks and slowed the economy.
Underlining worries about the economy, data showed on Wednesday that euro zone manufacturing activity fell to a near seven-year low in September.
"As the PMI tracks actual business levels rather than sentiment, it is likely that the full impact of the worsening financial crisis has yet to be felt, pointing to a weak final quarter of 2008," said Chris Williamson, chief economist at data compiler Markit.
Across Europe, the FTSE 100 index was up 1.5 percent, Germany's DAX was down 0.01 percent and France's CAC 40 was 0.7 percent higher.
AUTOS IN REVERSE GEAR
Automobile stocks took most points off the FTSEurofirst 300, and were the worst performer in Europe.
Daimler fell 5 percent on market talk that the group was about to issue a profit warning. The shares pared losses after it issued a denial but were still down 3 percent.
Porsche slumped 9.8 percent after the group reported that full fiscal-year revenue and unit sales stagnated at its core sports cars business amid a softening economic environment, it said on Wednesday, declining to give a forecast for the current year. Volkswagen, Renault and Peugeot fell 2-4.1 percent.
Among miners, Lonmin slumped 28.4 percent after Xstrata said it would not make a formal offer for the group. Xstrata was up 9.15 percent.
But the sector as a whole was higher, driven by a 1.4-percent rise in copper.
BHP Billiton tacked on 3 percent and Rio Tinto rose 7 percent after Australia's competition watchdog cleared BHP's proposed around $114 billion bid for Rio, saying it was unlikely to substantially lessen competition.
Energy stocks were higher as oil extended its rally, rising 1 percent to hover at just under $102 a barrel.
BG Group, BP, and Tullow Oil were 0.35-1.5 percent higher.
Date created : 2008-10-01