European markets rebound after central banks release funds


  • Business
  • Tuesday, 14 Aug 2007

LONDON (AP) - European shares closed sharply higher Monday, with financials and miners back in favor after heavy selling late last week, as investors took heart from central banks' moves to calm money markets. 

The U.K.'s FTSE 100 index posted its biggest one-day gain in more than four years, closing up 3 percent at 6,219.00.  

The French CAC-40 index advanced 2.2 percent to 5,569.28 and the German DAX 30 index surged 1.8 percent to 7,474.33. 

"It's time to buy equities again,'' said Morgan Stanley's European strategists. 

Notable gainers included miner Rio Tinto, which rose 7.1 percent, as well as insurance firm AXA, up 4.2 percent, and German airline Deutsche Lufthansa, up 4.2 percent. 

The gains came after the ECB, the Bank of Japan, the Federal Reserve and other central banks intervened in an attempt to jump-start stalled credit markets. 

"Markets hate uncertainty and there is a lot of it around currently. But one has to buy at the moment of maximum uncertainty and in our judgment now is close to such a moment,'' Morgan Stanley's strategists told clients. 

Morgan Stanley also said it has started to buy AXA as well as Credit Suisse Group, which was up 2.2 percent; Sweden's Swedbank, up 3.4 percent; and British recruitment firm Michael Page, up 9.4 percent. 

"Companies still have strong balance sheets, strategic M&A still has further to go, Sovereign Wealth Funds have significant amounts of cash to buy equities with, we see no recession coming, emerging markets are still in great financial shape, the earnings yield/bond gap is still positive. 

"Central banks have shown a strong and decisive willingness to step up to the plate and provide liquidity,'' the broker said. 

The European Central Bank acted once more to provide liquidity for the banking system in Monday, this time providing around euro47.5 billion ($65 billion) in loans. 

Deals were also back in focus, with the U.K.'s Imperial Chemical Industries up 2.8 percent after it agreed to be acquired by Akzo Nobel for 8 billion pounds (US$16 billion; euro12 billion).  

ICI had spurned earlier offers from the Dutch chemicals firm. Akzo Nobel rose 2.4 percent. 

OMX rose 2 percent after it confirmed that it would meet with representatives of Borse Dubai, which revealed last week that it had acquired a 4.9 percent interest and also had options to purchase a further 22.5 percent in the exchange operator.  

OMX had agreed earlier this year to be bought by Nasdaq Stock Market in a deal now worth around US$3.6 billion (euro2.6 billion). 

Kazakhmys gained more than 10 percent in London after UBS upgraded the miner to buy from hold, noting that the stock has lost 27 percent since the market correction started in mid-July. 

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