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London - European shares and commodity prices bounced on Wednesday after Europe’s finance ministers agreed to safeguard eurozone banks from the spreading sovereign debt crisis, though the euro hovered near a nine-month low against the dollar.
World stocks and commodities, such as Brent crude, were hit hard in the past few sessions on mounting concerns that a debt default by Greece in the coming months could lead to a banking crisis, which would aggravate the global economic slowdown.
European Economic and Monetary Affairs Commissioner Olli Rehn, however, told the Financial Times on Tuesday that the ministers, who have hitherto rejected any concerted bank recapitalisation, had a new sense of urgency.
His comments came hours after French-Belgian financial services group Dexia became the first European lender to have to be bailed out because of the eurozone debt crisis.
It also showed eurozone policymakers had become more aware of the seriousness of a potential banking crisis lately, which helped European equities to recover on Wednesday, though some analysts remained sceptical until they come up with concrete measure to tackle the crisis.
“This rally may not last. Lots of stocks look cheap. We need a strategy for resolving the sovereign debt crisis in the eurozone. We need a strategy to get on top of the US debt problem,” Jeremy Batstone-Carr, strategist at Charles Stanley, said.
“Until we get answers, the market can stay cheap. Economic authorities in Europe have continually failed to come up with a robust policy. Now they’re in the last chance saloon.”
Europe’s FTSEurofirst 300 advanced 1.5% on Wednesday, with banking shares up 2.8%. Dexia gained 2.8% after losing more than one-third of its value in the previous four sessions.
Italy’s share benchmark put on 1.3%, despite Moody’s lowering its credit rating on Italy late on Tuesday by three notches to A2, citing a “material increase” in funding risks for eurozone countries with high levels of debt and warning that further downgrades were possible.
However, the new Moody’s rating of Italy was in line with that of rival Standard & Poor’s, which cut its rating on Italy by one notch to single A last month.
Yields on 10-year Italian government bonds rose 4 basis points to 5.540%, while those on 10-year benchmark German Bunds rose 4.8 basis points to 1.769% after falling in the previous three sessions.
“It’s still a mess out there,” one bond trader said. “The Italy news has offset the bank recapitalisation talk. I don’t see any reason why Bunds should dramatically sell off.”
“The plan doesn’t seem to have any details, it is still the early stages of talks and generally these things don’t have anything other than a temporary impact.”
The euro was down 0.2% at $1.3314 and 0.4% at 102.13 yen , while the dollar was off 0.6% against a basket of major currencies.
World stocks measured by MSCI All-Country World Index put on 0.4%, after hitting a 15-month low the previous session.
Asian shares outside of Japan added 0.5%, though Japan’s Nikkei average fell 0.9%.
Copper rose 2.2% to trade just below $7,000 a tonne, snapping a five-day losing streak, while Brent crude added 2% to near $102 a barrel after a three-session losing run.
World stocks and commodities, such as Brent crude, were hit hard in the past few sessions on mounting concerns that a debt default by Greece in the coming months could lead to a banking crisis, which would aggravate the global economic slowdown.
European Economic and Monetary Affairs Commissioner Olli Rehn, however, told the Financial Times on Tuesday that the ministers, who have hitherto rejected any concerted bank recapitalisation, had a new sense of urgency.
His comments came hours after French-Belgian financial services group Dexia became the first European lender to have to be bailed out because of the eurozone debt crisis.
It also showed eurozone policymakers had become more aware of the seriousness of a potential banking crisis lately, which helped European equities to recover on Wednesday, though some analysts remained sceptical until they come up with concrete measure to tackle the crisis.
“This rally may not last. Lots of stocks look cheap. We need a strategy for resolving the sovereign debt crisis in the eurozone. We need a strategy to get on top of the US debt problem,” Jeremy Batstone-Carr, strategist at Charles Stanley, said.
“Until we get answers, the market can stay cheap. Economic authorities in Europe have continually failed to come up with a robust policy. Now they’re in the last chance saloon.”
Europe’s FTSEurofirst 300 advanced 1.5% on Wednesday, with banking shares up 2.8%. Dexia gained 2.8% after losing more than one-third of its value in the previous four sessions.
Italy’s share benchmark put on 1.3%, despite Moody’s lowering its credit rating on Italy late on Tuesday by three notches to A2, citing a “material increase” in funding risks for eurozone countries with high levels of debt and warning that further downgrades were possible.
However, the new Moody’s rating of Italy was in line with that of rival Standard & Poor’s, which cut its rating on Italy by one notch to single A last month.
Yields on 10-year Italian government bonds rose 4 basis points to 5.540%, while those on 10-year benchmark German Bunds rose 4.8 basis points to 1.769% after falling in the previous three sessions.
“It’s still a mess out there,” one bond trader said. “The Italy news has offset the bank recapitalisation talk. I don’t see any reason why Bunds should dramatically sell off.”
“The plan doesn’t seem to have any details, it is still the early stages of talks and generally these things don’t have anything other than a temporary impact.”
The euro was down 0.2% at $1.3314 and 0.4% at 102.13 yen , while the dollar was off 0.6% against a basket of major currencies.
World stocks measured by MSCI All-Country World Index put on 0.4%, after hitting a 15-month low the previous session.
Asian shares outside of Japan added 0.5%, though Japan’s Nikkei average fell 0.9%.
Copper rose 2.2% to trade just below $7,000 a tonne, snapping a five-day losing streak, while Brent crude added 2% to near $102 a barrel after a three-session losing run.
