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Markets gain on US shares rebound | |
(about 2 hours later) | |
US shares have rebounded from Tuesday's heavy falls, the Dow Jones index gaining 1.1% as investors looked to pick up bargains. | |
There are increased hopes the Federal Reserve will cut rates, analysts said. | |
The news dragged European shares higher after a day of mixed trading as US housing and credit woes continued to cast a shadow over stock markets. | |
The UK's FTSE 100 closed 0.5% ahead at 6,132.2 while Germany's Dax was 0.1% up after trailing for most of the day. | |
Earlier on Tuesday, Japan's main Nikkei index closed down 275 points, or 1.7%, at 16,013. | |
Rate cut hope | Rate cut hope |
The Dow Jones was up 137.7 points at 13,179.5 in early trade on Wednesday, having closed 280 points, or 2.1% down, on Tuesday. | |
Meanwhile the Nasdaq added 1.2% to 2,532.51. | |
Analysts said that investors hoped the volatility on global markets would be eased if, as many expect, the US Federal Reserve cuts interest rates next month. | Analysts said that investors hoped the volatility on global markets would be eased if, as many expect, the US Federal Reserve cuts interest rates next month. |
"The market is a little oversold, and bargain hunters are coming into the equation," said Weeden & Co strategist Steve Goldman. | |
We need more momentum...in order to start reversing some of yesterday's awful losses Peter DixonAnalyst, Commerzbank Market jitters and your wallet | We need more momentum...in order to start reversing some of yesterday's awful losses Peter DixonAnalyst, Commerzbank Market jitters and your wallet |
"The market is also getting closer to when the Fed will lower rates." | |
Tuesday's fall came after another warning about the impact of the problems in global credit markets - centred on the crisis in the US sub-prime mortgage sector - from investment bank Merrill Lynch. | |
The bank downgraded its opinion of stocks in three firms exposed to the sub-prime sector - Bear Stearns, Lehman Brothers and Citigroup. | The bank downgraded its opinion of stocks in three firms exposed to the sub-prime sector - Bear Stearns, Lehman Brothers and Citigroup. |
"We need more momentum I think in order to start reversing some of yesterday's awful losses," said Commerzbank economist Peter Dixon. | |
The sub-prime mortgage sector gives higher risk loans to people with poor credit histories. | The sub-prime mortgage sector gives higher risk loans to people with poor credit histories. |
Sub-prime default levels have risen to record highs in the US over the past year in the face of higher mortgage rates. | Sub-prime default levels have risen to record highs in the US over the past year in the face of higher mortgage rates. |
This has raised fears that this could hamper credit availability in the broader market, not just in America, but around the world. | This has raised fears that this could hamper credit availability in the broader market, not just in America, but around the world. |