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Reuters
London, Dec 7: A European share rally faded somewhat towards noon on Monday despite a bullish performance overnight in Asia and a surge on Wall Street Friday that propelled the Dow back above the 9,000 level. London, Frankfurt and Paris were still in positive territory in late morning trade, though well down from early peaks. Dealers warned that volumes were thin and there was a high potential for volatility.
In currencies, the dollar made attempts to rally but found its gains hampered by expectations that strong jobs growth seen in the US in November would not be enough to stave off a slowdown in American economic activity. While a report released on Friday showed the US jobless rate fell to 4.4 per cent in November from 4.6 per cent in October, anecdotal evidence of layoffs has kept talk of a US economic slowdown alive and is hobbling the U.S. currency.
``There is a lot of confusion about what would provide for dollar strength,'' said Jeffrey Woodruff, foreign exchange strategist at BankBoston inLondon. ``We got a strong employment report but we are seeing massive corporate layoffs.''
In London, Europe's biggest bourse, the blue-chip FTSE 100 index was around 0.5 per cent higher towards noon. Major feature was Scottish Power, which dropped 3.8 per cent as the market gave a cool reception to a 12 billion pound ($20 billion) merger with Pacificorp of the US. The market was little moved by slightly stronger than expected British data showing industrial production unchanged in October.
Analysts said the figures did little to dispel the chances of a British interest rate cut later this week. British government bonds (gilts), however, were well ahead with latest manufacturing data underpinning early gains.
In Frankfurt, Germany's blue-chip Xetra DAX index also fell back to be around half a per cent up after an early two per cent rise as traders said Wall Street's Friday close above the 9,000 point level was not convincing enough.
``We looked good to start with but have lost the impetus and are nowslipping away,'' said a Frankfurt trader at a large German bank. He added volumes being traded were very low. ``We could have a crack at getting above and staying above 5,000 if New York looked healthier, but after falling through support at 4,850 the impetus is more on the downside,'' he said.
Among the biggest gainers were car and bank stocks. Deutsche Bank AG was up 2.13 per cent and Hypovere Insbank was up 3.19 per cent. In the auto sector, Daimler Chrysler AG and Volkswagen AG also rose strongly. On the Paris bourse too, stocks were also well off early highs towards noon and dealers warned of returning volatility.
``After slipping to around 3,600 last week, the CAC is retracing its steps in a confirmed uptrend that should take it to around 3,840 by the end of the week,'' said one technical analyst. But ``last week's volatility is still around, testament to a feeling of nervousness among operators,'' warned a trader.
Meanwhile, European bonds rebounded as investors reallocated positions towards thelonger end of the curve. ``There isn't much selling and there are a lot of redemptions coming up at year-end. And I think people are just underweight the long end,'' said one dealer. ``There is no single factor driving prices,'' added another dealer.
The overnight jump in Asian markets was prompted not only by New York's performance but also by hopes of lower regional interest rates after an easing in China.
Hong Kong led the charge, climbing more than four per cent after China announced a 50-basis-point rate cut on Sunday after Friday's 25-basis-point cut in Hong Kong's prime rate. The Dow Jones industrial average looked set to open slightly firmer on Monday with the help of stronger European and Asian markets, London traders said.
On Friday, the Dow finished up 136.46 points, or 1.54 per cent, at 9,016.14, regaining the 9,000 mark after a strong jobs report soothed fears that the US economy might be endangered by weakness in Latin America.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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