European stocks extend gains after US jobs data
LONDON — European stock markets extended gains Wednesday after a U.S. jobs report helped Wall Street futures turn higher — despite ongoing worries about the outcome of the U.S. government’s stress tests of the country’s 19 leading banks.
In Europe, the FTSE 100 index of leading British shares was up 88.35 points, or 2 percent, to 4,425.29 after a closely watched survey from the Chartered Institute of Purchasing and Supply indicated that the British services sector is close to growing once again.
Meanwhile, Germany’s DAX was up 82.40 points, or 1.7 percent, at 4,935.43 with shares in car maker BMW AG up 6 percent after the company reported a smaller than anticipated first quarter loss.
France’s CAC-40 was up 25.49 points, or 0.8 percent, at 3,250.49 with BNP Paribas SA shares jumping over 6 percent after it reported first quarter net income above expectations.
Europe’s main markets had been only modestly higher but a stronger than anticipated payrolls survey in the U.S. pushed Wall Street futures into positive territory. Dow futures rose 41 points, or 0.5 percent, at 8,423 while the broader Standard & Poor’s 500 futures were up 4 points, or 0.4 percent, at 907.40.
The monthly survey from ADP Employer Services, which showed that only 491,000 jobs were lost in the U.S. in April, stoked market hopes that this Friday’s key official labor market figures will be better than expected. Before the ADP’s findings, economists were predicting another 600,000 plus jobs lost in the U.S. in April.
Despite the muted optimism surrounding the U.S. jobs data, concerns about the stress tests remained after the Wall Street Journal reported that federal regulators have warned Bank of America Corp. it will need to raise around $35 billion to plug a capital shortfall, way more than most expectations. The Journal cited unnamed individuals apparently familiar with the situation.
Bank executives were reportedly informed earlier this week about the outcome of the stress tests, which were designed to show how a bank would perform under different financial and economic conditions. The full results are expected to be published Thursday.
Stocks around the world have rallied strongly over the last few weeks on the belief that the global economy may start to recover later this year. In particular a run of better than expected U.S. economic data have indicated that the worst of the recession in the world’s largest economy may have run its course.
Stock markets usually rally around six to nine months before real evidence of an economic recovery.
“Whilst equity market sentiment and bank woes will drive the market in the short term, the medium term focus should remain on recovery,” said Stuart Bennett, an analyst at Calyon Credit Agricole.
Despite optimism among some investors, many analysts think the markets may be overestimating the speed and scale of the economic rebound in the wake of the slight improvements seen in the economic news over recent weeks.
“Most likely, this is still a bear market rally. While financial markets are mending, we’re going to see negative surprises the next few quarters,” said Nouriel Roubini, an economist at New York University’s Stern School of Business who predicted the crisis.
“The bottoming of the economy will happen later rather than sooner, next year rather than this year,” he added. “I would stay away from U.S. and global equities. Markets and investors are getting ahead of the data, they’re becoming overoptimistic.”
Earlier, stock markets in Asia recouped earlier losses as many investors took the retreat as a buying opportunity.
In Hong Kong, the Hang Seng rebounded to close up 404.49 points, or 2.5 percent, at 16,834.57, and Shanghai’s index added 25.18 points, or 1 percent, to 2,592.52 — a nine-month high.
Japan’s financial markets, closed since Monday, will reopen Thursday.
Elsewhere, Singapore’s benchmark index surged 5.1 percent as two of the city-state’s major lenders — United Overseas Bank and Oversea-Chinese Banking Corp. — posted stronger-than-forecast profits for the first quarter.
Taiwan’s market also remained strong, rising 2.9 percent amid continued investor optimism over prospects for increased investment from China after the signing of a financial cooperation agreement last week.
Among the region’s laggards, South Korea’s Kospi lost 0.3 percent and Australia’s stock measure shed 0.6 percent.
Oil prices gained moderately, with benchmark crude for June delivery up 21 cents to $54.05 a barrel.
In currencies, the dollar slipped to 98.61 yen from 98.79 yen, while the euro rose to $1.3350 from $1.3319.
AP Business Writer Jeremiah Marquez in Hong Kong contributed to this report.
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