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Global markets stage fightback
LONDON (AFP) - - Asian and European equities rebounded on Thursday, mirroring Wall Street gains, as investors welcomed a dramatic drop in oil prices ahead of crucial banking results in the United States.
World stock markets bounced higher after a sharp global equities sell-off earlier this week that was rooted in worries about the troubled US financial services sector.
Later on Thursday, major US investment banks JPMorgan and Merrill Lynch were to reveal their balance sheets. Citigroup, which has been hit hard by the subprime loan crisis, reports earnings on Friday.
New York rallied sharply on Wednesday, triggered by better-than-expected second-quarter earnings from California-based bank Wells Fargo -- which gave a much-needed confidence boost to the global banking sector.
"The rise in financials reverses five days of sharp falls that accelerated in the first two days of this week," said ABN Amro analyst Melinda Smith.
"Significant enough to calm nerves but still leaves us a long way from thinking the worst has past given the ongoing concerns over inflation, growth and financial markets.
"Therefore sentiment still remains fragile."
In European deals on Thursday, London rallied 1.16 percent, Frankfurt clawed back 1.30 percent and Paris added 1.58 percent nearing the half-way stage.
In Asia, Tokyo closed up 1.0 percent, Hong Kong leapt 2.41 percent, Sydney won 0.6 percent and Singapore rose 1.02 percent.
Nerves were soothed by tumbling oil prices, which slumped by more than ten dollars over the past two days, and fell further Thursday on concern that slowing US economic growth would hurt crude demand, traders said.
Lower oil prices cut energy costs for companies and tend to boost share prices, but the energy production sector normally takes a hit.
Wall Street rose sharply on Wednesday, with Dow Jones Industrial Average vaulting 2.52 percent, amid a surge in troubled mortgage giants Fannie Mae and Freddie Mac.
The banking sector led the charge, with an index of banking shares jumping more than 16 percent after Wells Fargo reported a stronger-than-expected profit of 1.8 billion dollars.
However, investors remain on edge about fresh fall-out from the collapsed US subprime home loan market.
"Reassuring news from Wells Fargo provided a boost to the equity market yesterday (Wednesday) so given the quiet data calendar much attention will be on more second quarter results released today," said Calyon economist Daragh Maher.
European stock markets had closed mainly higher on Wednesday, steadying after heavy losses earlier in the week as investors sought a handle on problems in the US financial services sector.
A sharp drop in oil prices allowed some careful bargain hunting in the hardest hit shares after a painful global equities sell-off Tuesday.
Analysts said markets were also boosted after a move by the Securities and Exchange Commission (SEC) to limit certain types of "short sales" in financial shares that aim to profit from a market decline.
"The SEC decision to crack down ... looks to have had an immediate impact on the US equity markets," said economist Derek Halpenny at The Bank of Tokyo-Mitsubishi UFJ in London.
"Better than expected earnings results may have been a factor but the scale of the move suggests the SEC announcement has played an important role in this equity market rally."
In the foreign exchange market on Thursday, the dollar slid against the euro ahead of US earnings and housing data.
The euro advanced to 1.5863 dollars, from 1.5821 late in New York on Wednesday, but remained under the record high of 1.6038 that was struck on Tuesday.
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