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European shares brush off US woes US shares recover from declines
(about 3 hours later)
European shares have risen in Tuesday trading, brushing off concerns about the US economy that had seen Wall Street close sharply lower overnight. US shares have risen in early Tuesday trading on Wall Street, lifted by bargain hunters buying up cheap stocks following Monday's sharp falls.
London's FTSE 100 was up 0.8% by noon trading, with analysts saying stocks were lifted by bargain hunters buying cheap shares after Monday's falls. With analysts saying sentiment had also been lifted by strong results overnight from Hewlett-Packard, the main Dow Jones index was up 71 points to 13,029.
Meanwhile, Frankfurt's Dax added 1.2% and Paris' Cac gained 0.8%. However, gains were limited by ongoing US mortgage and credit market concerns.
Overnight the main US index, the Dow Jones, fell 1.7% due to further fears about the continuing credit crisis. Home loan group Freddie Mac was the latest to warn of woe in the mortgage sector, posting a $2bn (£1bn) loss.
The big decline came after Goldman Sachs downgraded the shares of Citigroup, and forecast the banking giant would report $15bn (£7.3bn) in losses. The company made the loss in the three months to 30 September, and said it had needed to set aside $1.2bn to cover bad mortgage debt.
Fears remain It is one of the two government-sponsored enterprises that lend money to banks to use for mortgages, and it had been thought that its loan book did not have as much exposure to bad debt as some of the commercial banks.
Analyst Franz Wenzel, of Axa Investment Mangers in Paris, cautioned that the European share gains could be short-lived. 'Risk aversion'
It's a Black November Masayoshi Okamoto, Jujiya Securities Analysts said bargain hunters had also helped European shares recover from their Monday falls.
"We should not be too enthusiastic about what we see in the European markets," he said. By mid afternoon in Europe, London's main FTSE 100 index was up 0.5%, while Frankfurt's Dax had added 0.9%, and Paris' Cac had advanced 0.6%.
"We're not yet out of the woods. For that we would definitely need the US market to regain some positive momentum, and that's not what we have currently."
Analysts said US investors remained fearful that ever more global banks would reveal their exposure to bad American mortgage debt and the resulting credit crisis.Analysts said US investors remained fearful that ever more global banks would reveal their exposure to bad American mortgage debt and the resulting credit crisis.
"The concern is that if there are unknown losses still to be recorded, the risk aversion that has been present in markets will remain," said Tony Brennan, equity strategist at Deutsche Bank."The concern is that if there are unknown losses still to be recorded, the risk aversion that has been present in markets will remain," said Tony Brennan, equity strategist at Deutsche Bank.
"It's a Black November," said Masayoshi Okamoto, head of dealing at Japan's Jujiya Securities."It's a Black November," said Masayoshi Okamoto, head of dealing at Japan's Jujiya Securities.
Tokyo's Nikkei 225 closed up 1.1% on Tuesday after sentiment was buoyed by a takeover bid for one of the country's largest banks.Tokyo's Nikkei 225 closed up 1.1% on Tuesday after sentiment was buoyed by a takeover bid for one of the country's largest banks.
A group of investors led by US buyout firm JC Flowers are bidding about $1.8bn for just under a third of Shinsei Bank.A group of investors led by US buyout firm JC Flowers are bidding about $1.8bn for just under a third of Shinsei Bank.