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European stocks confirm previous gains

Text by AFP

Latest update : 2008-11-26

The European stock markets closed slightly up the day after heavy gains following Obama's announcement of his new Treasury Minister on Monday. Wall Street opened on a rise but struggled to consolidate after two strong days.

European stock markets closed firmer Tuesday after giving up some early gains, with the London FTSE 100 index of leading shares up 0.44 percent at 4,171.25 points.

In Paris, the CAC 40 gained 1.18 percent to 3,209.56 points and in Frankfurt the DAX edged up 0.13 percent to 4,560.42 points.

US stocks struggled Tuesday as traders consolidated after a powerful two-day rally and mulled the latest effort by the Federal Reserve to restart credit markets and lower borrowing costs.

The Dow Jones Industrial Average gave back opening gains and fell 11.47 points (0.14 percent) to 8,431.92 at 1624 GMT after two days of hefty gains that added nearly 900 points to the blue-chip index.

The tech-heavy Nasdaq dropped 23.94 points (1.63 percent) to 1,448.08 and the broad Standard & Poor's 500 drifted down 2.52 points (0.30 percent) to 849.29.

Market action came as the US Federal Reserve announced plans to pump up to 800 billion dollars into the financial system in purchases of mortgage- and asset-backed securities.

The new efforts come as part of a move to restart consumer credit markets that froze up in October and to get more liquidity and bring down borrowing costs for the housing market, which is at the center of the economic storm.

The announcement gave an early boost to stocks, but that faded as economic news offered little encouragement.

The Commerce Department reported the US economy shrank at a 0.5 percent pace in the third quarter, in a revised estimate for gross domestic product that many analysts say is the start of a steep downturn.

Separately, the Conference Board reported US consumer confidence bounced back in November from an all-time low a month earlier, but still reflects weak economic conditions.

A Case-Shiller/Standard & Poor's report on the US housing market showed a record 18.6 percent drop in home prices in the 10 largest cities, suggesting the correction in housing is not over.

"Unemployment is rising and foreclosures continue to increase. Home prices will remain under pressure," said Gary Bigg at Bank of America.

"We expect at least another full year of decline as home prices move back into line with rents."

Bob Dickey at RBC Wealth Management said the volatile trade was not unusual as the market lows are tested.

"It's the closing action that makes the biggest difference, so no matter how the day pans out, the last hour has more to do with future direction than the intraday gyrations," he said.

"It is a positive, however, that both Friday and Monday were up -- and on above-average volume -- which is an indication that the market psychology may be turning more hopeful."

Among stocks in focus, Citigroup extended its rally with a gain of 4.03 percent to 6.19 dollars. The banking giant rose nearly 60 percent Monday after getting a new lifeline from the US government, but remains sharply lower for the year.

Elsewhere in the finance arena, Goldman Sachs rose 2.86 percent to 69.35 dollars and Morgan Stanley added 4.56 percent to 13.99.

Hewlett Packard led the tech sector lower, losing 5.9 percent to 33.59 dollars as investors locked in gains in the sector after the computer giant reported profits roughly in line with expectations.

Apple fell 4.36 percent to 88.90 dollars and shed 5.5 percent to 40.20 dollars.

Bonds firmed. The yield on the 10-year US Treasury bond dropped to 3.129 percent from 3.340 percent Monday and that on the 30-year bond eased to 3.619 percent against 3.755 percent. Bond yields and prices move in opposite directions.

Date created : 2008-11-25