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Global stock markets stage rally as volatility continues | |
(about 4 hours later) | |
Global stock markets have staged a partial recovery after a week of precipitous falls and volatility. | |
London's FTSE 100 index was up over 1% in mid-afternoon trading, while Germany's Dax was up 1.76% and France's Cac 40 was up more than 2%. | |
On Wall Street, the Dow Jones index opened nearly 1% higher after better-than-expected US industrial production data helped steady the ship. | |
Fears over a weakening global economic outlook had unsettled investors. | |
The FTSE 100 had fallen 10% since early September, wiping £175bn off the value of listed businesses. | |
'Turbulence' | 'Turbulence' |
Explaining the recent convulsions in the markets, Carl Weinberg, chief economist and managing director at New York-based consultancy High Frequency Economics, said investors had taken fright over the faltering European economy and a slew of weaker global economic data. | Explaining the recent convulsions in the markets, Carl Weinberg, chief economist and managing director at New York-based consultancy High Frequency Economics, said investors had taken fright over the faltering European economy and a slew of weaker global economic data. |
Some "untested" economic indicators had given the impression the European market was recovering when it was not, Mr Weinberg argued. | Some "untested" economic indicators had given the impression the European market was recovering when it was not, Mr Weinberg argued. |
"The underlying economy is as bad now as it was a week or two weeks ago," he told the BBC. | "The underlying economy is as bad now as it was a week or two weeks ago," he told the BBC. |
"But the perceptions have changed and that's causing turbulence in the markets." | "But the perceptions have changed and that's causing turbulence in the markets." |
Steven Saywell, head of foreign exchange strategy at BNP Paribas, said the real concern over the faltering eurozone economy was inflation, currently running at 0.3%. | Steven Saywell, head of foreign exchange strategy at BNP Paribas, said the real concern over the faltering eurozone economy was inflation, currently running at 0.3%. |
"We believe the risk is it could fall even further," he said. | "We believe the risk is it could fall even further," he said. |
BNP Paribas believes European Central Bank president Mario Draghi should take bold measures to buy sovereign bonds in an attempt to convince investors that the rate of inflation would increase. | BNP Paribas believes European Central Bank president Mario Draghi should take bold measures to buy sovereign bonds in an attempt to convince investors that the rate of inflation would increase. |
'Market needs volatility' | 'Market needs volatility' |
This period of volatility was no worse than it had been in the past, Mr Weinberg maintained, and was a necessary condition if markets were "to make money". | This period of volatility was no worse than it had been in the past, Mr Weinberg maintained, and was a necessary condition if markets were "to make money". |
In recent years, central banks maintaining a policy of low interest rates had dampened market speculation, but now that it was a question of when rates would rise, rather than whether, this was stimulating investor activity, Mr Weinberg argued. | In recent years, central banks maintaining a policy of low interest rates had dampened market speculation, but now that it was a question of when rates would rise, rather than whether, this was stimulating investor activity, Mr Weinberg argued. |
But such speculation was countered by recent comments from Andrew Haldane, the Bank of England's chief economist. | But such speculation was countered by recent comments from Andrew Haldane, the Bank of England's chief economist. |
He said UK interest rates should remain low to avoid long-term economic stagnation, after giving a downbeat assessment of the UK economy. | He said UK interest rates should remain low to avoid long-term economic stagnation, after giving a downbeat assessment of the UK economy. |
Weaker global growth, low wage growth and financial and political risks contributed to his more cautious view. | Weaker global growth, low wage growth and financial and political risks contributed to his more cautious view. |
"This implies interest rates could remain lower for longer, certainly than I had expected three months ago," he said in a breakfast meeting speech to business leaders. | "This implies interest rates could remain lower for longer, certainly than I had expected three months ago," he said in a breakfast meeting speech to business leaders. |