AP - Most European markets rose and Spain and Italy’s borrowing costs dipped to more manageable levels on Monday after the European Central Bank said it would buy the two countries’ bonds in order to help them avoid devastating defaults.
Asian markets traded lower but their retreat was not as bad as many had feared over the weekend after a downgrade of U.S. debt. Japan’s Nikkei 225 stock average closed 2.2 percent lower at 9,097.56.
Late Sunday, Europe’s central bank said it would “actively implement” its bond-buying program to calm investor concerns that Italy and Spain won’t be able to pay their debts. Last week, worries over the two countries’ ability to keep tapping bond markets contributed to the turmoil in global markets, which saw around $1.5 trillion wiped off share prices.
As well as sharply reducing the two countries’ market borrowing costs, their stock markets have pushed ahead, with the banks doing particularly well. Milan’s FTSE MIB was up 3.7 percent, while Spain’s rose 3.6 percent. Relief was evident all over Europe, with the FTSE 100 index of leading British shares up 0.3 percent at 5,261 while France’s CAC-40 rose 0.4 percent to 3,292. Germany’s DAX bucked the trend, falling 0.3 percent to 6,219.
“There seems to be a bit of a relief rally but to be honest investors are still cautious,” said Neil MacKinnon, global macro strategist at VTB Capital. “This is a short-term band-aid.”
The longer term issues that have dogged markets of late remain, MacKinnon said, notably the fear that the global economy is heading towards a double-dip recession and that a number of banks is heavily exposed to potentially bad debt across the eurozone.
Though European stocks have managed to eke out gains Monday, Wall Street is still expected to open lower later in its first session following Standard & Poor’s historic decision to downgrade the U.S.’s rating for the first time ever.
Dow futures were down 0.9 percent at at 11,294 while the broader Standard & Poor’s 500 futures fell 1 percent to 1,186.
Asian markets traded lower but their retreat was not as bad as many had feared over the weekend after a downgrade of U.S. debt. Japan’s Nikkei 225 stock average closed 2.2 percent lower at 9,097.56.
Late Sunday, Europe’s central bank said it would “actively implement” its bond-buying program to calm investor concerns that Italy and Spain won’t be able to pay their debts. Last week, worries over the two countries’ ability to keep tapping bond markets contributed to the turmoil in global markets, which saw around $1.5 trillion wiped off share prices.
As well as sharply reducing the two countries’ market borrowing costs, their stock markets have pushed ahead, with the banks doing particularly well. Milan’s FTSE MIB was up 3.7 percent, while Spain’s rose 3.6 percent. Relief was evident all over Europe, with the FTSE 100 index of leading British shares up 0.3 percent at 5,261 while France’s CAC-40 rose 0.4 percent to 3,292. Germany’s DAX bucked the trend, falling 0.3 percent to 6,219.
“There seems to be a bit of a relief rally but to be honest investors are still cautious,” said Neil MacKinnon, global macro strategist at VTB Capital. “This is a short-term band-aid.”
The longer term issues that have dogged markets of late remain, MacKinnon said, notably the fear that the global economy is heading towards a double-dip recession and that a number of banks is heavily exposed to potentially bad debt across the eurozone.
Though European stocks have managed to eke out gains Monday, Wall Street is still expected to open lower later in its first session following Standard & Poor’s historic decision to downgrade the U.S.’s rating for the first time ever.
Dow futures were down 0.9 percent at at 11,294 while the broader Standard & Poor’s 500 futures fell 1 percent to 1,186.
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