European markets recover lost ground

UPDATED:

LONDON (AP) – European markets shed some early gains Thursday ahead of Wall Street’s opening, but remained in positive territory, with British banking stocks in particular enjoying a strong rally in the wake of the government’s 500 billion pound (US$865 billion) rescue plan.

European jitters appear to have been calmed by Wednesday’s simultaneous interest rate cuts from the world’s key central banks, even though lending between financial institutions remains limited, and despite mounting speculation that the U.S. may copy the British plan to buy stakes in banks to restore confidence in the battered U.S. financial system.

“Equities appear to offer value at current levels, they are clearly oversold in the short-term and policy-makers are, somewhat belatedly, taking action to support the system and the economy,” said Tony Dolphin, director of economics and asset allocation at Henderson Global Investors.

By early-afternoon London time, Germany’s DAX was 76.14 points, or 1.5 percent, higher at 5,,077.30, while France’s CAC-40 was up 88.63 points, or 2.5 percent, at 3,585.52. The FTSE 100 index of leading British shares was 59.59, or 1.4 percent, higher at 4,426.28.

Related stories:

• Wall street opens higher

• Rate cuts raise bigger concerns

• 3 Asian banks slash rates

All three indexes had been around 3 percent higher earlier in the session, but some profit-taking ahead of the bell in New York appeared to prompt the modest retreat.

Nevertheless, Wall Street appears to be heading for a strong open after IBM Corp. reaffirmed its profit outlook and investors hoped that the panic selling that cascaded through global markets a day earlier was over, at least for now. Dow futures rose 136, or 1.46 percent, to 9,327.

Britain’s benchmark index was helped higher by a positive reaction to the British government’s rescue package, with shares in the two most troubled banking stocks gaining plenty of ground. HBOS PLC stock was up 30 percent, while Royal Bank of Scotland added 13 percent.

The British goverment pledged some 50 billion pounds to buy stakes in the country’s major banks, as well as underpinning bank finances by a further 450 billion pounds (US$778 billion).

It wasn’t just British banking stocks doing well today. In Germany, Hypo Real Estate Holding AG, which has received a government-sponsored rescue, was up more than 12 percent, Commerzbank AG bounced more than 9 percent and Deutsche Bank AG was nearly 6 percent higher.

And the news that the governments of France, Belgium and Luxembourg will give struggling lender Dexia SA a yearlong guarantee on its new loans and deposits, sent the company’s shares soaring by 18 percent.

Story Continues →