Stocks Rebound After Big Fed-related RetreatFebruary 22nd, 2013 12:02 pm Associated Press
LONDON (AP) — Stocks rebounded Friday after two days of losses sparked by fears the U.S. Federal Reserve would abandon its super-easy monetary policy sooner than many in the markets were predicting.
A solid German economic survey also shored up trading through the European session. The Ifo index rose to 107.4 in February from 104.3 the previous month. It was the fourth monthly increase in a row and well above the 104.9 points expected by financial market analysts.
“The Ifo index now looks consistent with annual German GDP growth of around 2 percent,” said Jennifer McKeown, a senior European economist at Capital Economics.
A recovering Germany will go a long way to supporting economic growth across Europe, not least in the economy of the 17 European Union countries that use the euro. That hope helped European markets look beyond the latest forecast from the European Commission, the EU’s executive arm that the eurozone recession will last longer than it previously thought.
In Europe, the FTSE 100 index of leading British shares was up 0.7 percent at 6,338 while Germany’s DAX rose 0.9 percent to 7,651. The CAC-40 in France was 1.6 percent higher at 3,682.
Wall Street was poised for a solid opening with Dow futures up 0.3 percent and the broader S&P 500 futures 0.4 percent higher.
The pick-up comes after a sizeable sell-off, which started in the second half of Wall Street’s trading session on Wednesday following the release of the minutes to the last policy meeting of the Fed.
The minutes showed some policymakers worried about the cost of the bank’s monetary stimulus, which triggered speculation that the asset purchases it has been conducting would end sooner than anticipated. The purchases, commonly known as quantitative easing, are designed to boost the U.S. economy, partly by increasing liquidity in financial markets and by keeping a lid on interest rates in the bond markets.
Those concerns remain about future U.S. monetary policy remains. And others have the potential to bring an end to the prevailing optimism that has marked 2013 out so far in the markets.
This weekend’s Italian elections could stoke renewed worries over Europe’s’ debt crisis especially if there is a protracted period before a government is formed. Fears over the U.S. budget are also never far from the surface.
“Whether this renewed support can actually stick in what is shaping up to be a rather quiet session remains to be seen,” said Fawad Razaqzada, market strategist at GFT Markets.
Earlier, the Asian heavyweight, Tokyo’s Nikkei 225 index, recovered to gain 0.7 percent to 11,385.94. The region’s biggest economy, China’s benchmark Shanghai Composite Index fell 0.5 percent to 2,314.15. Elsewhere, Seoul’s Kospi gained 0.2 percent to 2,018.89 while Hong Kong’s Hang Seng shed 0.5 percent to 22,782.44.
In other financial markets, trading was fairly light.
In currency markets, the euro was down 0.1 percent at $1.3179 while the dollar fell the same rate to 93.20 yen. In the oil markets, benchmark crude for April delivery was up 16 cents at $93 a barrel in electronic trading on the New York Mercantile Exchange.