STOCKS MARKETS around the world bounced off their lows yesterday, as better-than-expected corporate results, combined with "bottom fishing", saw indices claw back some of their losses.
In Britain, better-than-forecast results from oil producer BP and insurance giant Aviva saw the FTSE 100 advance for the first time in three days, climbing 73.79 points, or 1.92 per cent, to close at 3,926.38, having briefly surpassed 4,000 points. BP closed up 5.4 per cent, while Aviva finished up 5.6 per cent.
Stocks also rose in Europe, with the Dow Jones Stoxx 600 finishing up 2.3 per cent at 199.44. In France, the CAC 40 also ended the day in positive territory, up by 1.6 per cent, although banks finished down on the day. Societé Generale declined for a second day in a row, losing 12 per cent, while Credit Agricole lost 13.4 per cent.
In Germany, a stellar performance from car manufacturer Volkswagen saw the DAX close up 9.9 per cent. The European Commission approved Germany's €500 billion bank bail-out package yesterday.
Volkswagen, which accounts for 27 per cent of the index, briefly became the world's largest company, as short covering from hedge funds saw its share price soar by more than 80 per cent to €1,005, adding to a 146 per cent rise the day before, and its market capitalisation increase by as much as €150 billion to €296 billion, ahead of oil company ExxonMobil. Volkswagen is the most shorted stock on the DAX.
In its largest one-day injection of capital, the European Central Bank lent banks €325 million in one-week financing, while money market rates also declined yesterday, as cash injections into Europe's banks continues to bring inter-bank lending rates down.
According to the British Bankers Association, Libor (the London interbank offered rate), for three-month loans in dollars fell by four basis points to 3.47 yesterday, its 12th straight drop, while the comparable euro rate dropped five basis points to 4.85 per cent, the lowest level since April 28th.
Although US consumer confidence sank to its lowest level on record, down from 61.4 in September to 38.0 this month, US stocks rallied. Analysts attribute this to "bottom fishing", as investors looked to take advantage of the lowest stock valuations in two years. By noon, the SP 500 had advanced by 13.15 points, or 1.6 per cent, to 862.07, while the Dow Jones Industrial Average gained 269.05, or 6.8 per cent, to 8,444.82.
In Asia, stocks rebounded, with Hong Kong's Hang Seng coming off its steepest decline in a decade by advancing by 14.35 per cent. The MSCI Asia Pacific Index climbed by 3.7 per cent to 77.99, while in Japan, the Nikkei 225 gained 6.41 per cent. The yen dropped for the first time in six days against the dollar and dropped the most in almost eight years against the euro.
Oil fell below $63 a barrel yesterday, down by 30 cents to $62.92 by 2.34pm, due to concerns over the deteriorating global economy, while gold benefited from a softer dollar and a recovery in equities, with spot gold prices rising by $6.80 to $736.40 an ounce. (Additional reporting Reuters)
