European stocks regain ground

May 14, 2009 8:11:48 AM PDT
A stronger than anticipated opening on Wall Street helped Europe's main stock markets recoup losses Thursday despite big selling in Asia earlier. In Europe, Germany's DAX was down 3.33 points, or 0.1 percent, at 4,724.28 while France's CAC-40 declined 19.74 points, or 0.3 percent, to 3,142.31. The FTSE 100 index of leading British shares was up 23.51 points, or 0.5 percent, at 4,354.88.

All three markets had been solidly lower amid expectations that Wall Street would open lower. Asian indexes fell on disappointing U.S. retail sales data from Wednesday.

Some bargain-hunting took place Thursday on Wall Street after Wal-Mart Stores Inc., the world's biggest retailer, reported first-quarter results in line with analysts' expectations.

The Dow Jones industrial average was up 37.35 points, or 0.5 percent, at 8,322.24 soon after the open while the broader Standard & Poor's 500 index rose 4.70 points, or 0.5 percent, to 888.62.

The gains in the U.S. came despite news from the Labor Department that weekly jobless claims rose by more than anticipated. New claims jumped to 637,000, ahead of the 610,000 anticipated in the markets.

Stocks around the world have fallen for much of the week amid nagging doubts that the recent two-month may have been overdone.

Those concerns increased Wednesday following the news that U.S. retail sales fell 0.4 percent last month, worse than the flat reading expected. The April weakness followed a 1.3 percent drop in March that was worse than first estimate.

A rebound in consumer demand is considered a necessary ingredient for ending the recession both domestically and abroad as the U.S. consumer accounts for around 70 percent of the U.S. economy and around 20 percent of the global economy.

Stocks around the world have rallied strongly over the last few weeks - with some major indexes turning positive for the year before this week's selling. The S&P has risen around 30 percent its lows.

The trigger for the gains has been better than expected economic news, particularly in the U.S., the world's largest economy but those hopes were dampened if not totally extinguished by the retail sales data.

"The 'green shoots' brigade seem to lack the courage of their convictions," said Stephen Lewis, an analyst at Monument Securities.

"For U.S. stock indices to have dropped yesterday by 2 percent or more, after one piece of weaker than expected economic data, was a pusillanimous response," he added.

The main talking point in the markets through this week has been whether the two-month rally was just a bear market rally or whether it is a harbinger of a fundamental improvement.

"Ultimately, the rally hinges on the economies ability to validate investor recovery expectations and we are concerned that the markets not only anticipate a second half recovery but also a 'V' shaped recovery," said Steven Ricchiuto, an analyst at Mizuho Securities.

"Our credit oriented risk analysis shows that the consumer and bank balance sheets are in no condition to assure a sustained recovery let alone a sharp rebound in growth," he added.

Wednesday's decline in Europe and the U.S. fueled a wave of selling in Asia earlier, where Japan's benchmark Nikkei 225 stock average slumped 246.76 points, or 2.6 percent, to 9,093.73, and Hong Kong's Hang Seng tumbled 517.93 points, or 3 percent, to 16,541.69.

Elsewhere in Asia, South Korea's Kospi shed 2.4 percent to 1,380.95. Australia's benchmark fell 3.4 percent, Shanghai's index lost 0.9 percent and Taiwan's stock measure shed 1.8 percent.

India's Sensex fell 1.2 percent as the country's monthlong election ended.

The problems in the stock markets hit confidence in the oil markets too, with benchmark crude for June delivery down 42 cents at $57.60 a barrel.

In currencies, the dollar inched higher to 95.66 yen from 95.36 yen while the euro rose modestly to $1.3583 from $1.3559.