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Global stocks rebound on hopes of US rate cut

©

Text by REUTERS

Latest update : 2008-10-28

Asian markets bounced back Tuesday, buoyed by the prospect of further US interest rate cuts. Europe's leading stocks also closed up, with the Paris CAC 40 gaining 1.55 percent and London's FTSEurofirst 300 index jumping 2.2 percent.

European shares closed 2.2 percent higher percent on Tuesday, snapping a five-day losing run as Volkswagen rocketed again on short-covering but losses in banks took the shine off the market's earlier surge.
 
The FTSEurofirst 300 index of leading European shares ended 2.2 percent higher at 834.36 points, having risen to a day's high of 851.17.
 
The index has lost about 45 percent in value so far this year, whipped by a credit crisis that has pushed the world economy to the brink of recession.
 
"There is the potential for a sizable rebound...In bear markets we have seen sizable rebounds in the past," said Bernd Meyer, head of pan-European equity strategy at Deutsche Bank in London.
 
"(But) as long as investors are not sure where the macro-economy is heading...the market will have a problem seeing a sustained upswing."
 
Volkswagen surged more than 80 percent, adding to a 146 percent rise the day before, as short sellers continued to pile into the stock on news at the weekend that Porsche had bought up much of VW's remaining free float.
 
VW briefly became the world's biggest company by market value on Tuesday. Porsche was up 9.9 percent.
 
"We're in a market full of anomalies at the moment," said Graham Secker, UK equity strategist at Morgan Stanley in London.
 
"The mispricing everywhere is quite extraordinary," he added.
 
Banks took a fresh beating. Shares in French bank Societe Generale slumped for a second day in a row, down more than 12 percent as traders cited a possible exposure to the share price surge at Volkswagen.
 
The European banks sector lost 3.5 percent, with BNP Paribas off 10.4 percent, Credit Agricole down 13.4 percent and Deutsche Bank shedding 13.3 percent.
 
Asia-focused bank Standard Chartered rose 2.9 percent, after saying it made good progress in the third quarter of 2008 despite slower economic growth in the region, and reassured on its capital strength. London-listed Standard Chartered generates two-thirds of its revenues in Asia.
 
 
DAX SURGES
 
Across Europe, Britain's  FTSE 100 was up 1.9 percent, Germany's DAX was  up 11.3 percent, boosted by Volkswagen, and France's CAC-40 was up 1.6 percent.
 
U.S. stocks also rose. The U.S. Federal Reserve was to begin a two-day interest-rate policy meeting later on Tuesday, and investors expected the Fed to cut rates -- now at 1.50 percent -- by at least a further 50 basis points.
 
In Europe heavyweight stock BP rose 5.4 percent after it reported a 148 percent rise in third-quarter replacement cost profit, at $10.03 billion, boosted by higher oil prices.
 
"We like the oil stocks. Buying big blue-chip stocks where the dividend yield is higher than the PE is a sensible thing to do," Morgan Stanley's Secker added.
 
Total and Royal Dutch Shell were up 6.2 and 4.7 percent, respectively.
 
BG Group was up 7 percent after launching a A$5.6 billion ($3.4 billion) friendly takeover bid for Australia's Queensland Gas Co Ltd(QGC) as it tries to secure gas to boost its position in Asia's liquefied natural gas market.
 
Aviva rose 5.6 percent after the insurer said it had had no discussions with the UK government about capital support and reported a 12 percent rise in sales for the nine months to September.
 
Its peer Friends Provident rocketed more than 28 percent, topping the gainers on the FTSE 100.
 
Dutch insurer Aegon was down 14 percent after saying that the Dutch government will provide 3 billion euros of capital. The company said it will scrap its final 2008 dividend, as it reported a third-quarter loss of 350 million euros.
 
The terms of the cash injection are nearly identical to the deal between the Dutch government and financial group ING announced last week.
 
ING shed 13.4 percent after Fitch cut its outlook to "negative" from "stable".

Date created : 2008-10-28

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