Euro­pean stocks lick wounds af­ter maul­ing, oil steady

The Pak Banker - - MARKETS/SPORTS -

Euro­pean shares and oil prices held steady at multi-year lows on Thurs­day af­ter a tor­rid two days that has wiped tril­lions of dol­lars off global mar­kets.

A 3-per­cent slump in Chi­nese stocks had given Asia an­other bruis­ing, so there was re­lief as early 0.2-0.4 per­cent gains for Lon­don's FTSE .FTSE, Ger­many's DAX . GDAXI and France's CAC 40 .FCHI pulled mar­kets out of their nose­dive.

The FTSEurofirst 300 .FTEU3 hit its low­est since Oc­to­ber 2014 on Wed­nes­day and the MSCI all-world coun­try in­dex .MIWD00000PUS was at its June 2013 low. Oil prices, down more than 25 per­cent this year, have been one of the main driv­ers of the cross-as­set rout, were also stead­ier at $27.60 for Brent LCOc1 and $28.15 for WTI CLc1.

The Euro­pean Cen­tral Bank ( ECB) meets on Thurs­day and is ex­pected keep al­ready record low in­ter­est rates on hold. Traders will be watch­ing closely to see what im­pact the lat­est mar­ket tur­moil is hav­ing on the bank's de­ci­sion mak­ers. "Europe is hold­ing up a bit bet­ter which is wel­come con­sid­er­ing Asia eq­ui­ties con­tin­ued to trade lower," So­ci­ete Gen­erale strate­gist, Alvin Tan, said.

"For one thing, oil is not ex­actly ral­ly­ing but at least it is hold­ing on, and we have the ECB meet­ing to­day which is a big event, so I think peo­ple are just be­ing a bit more re­strained."

With nerves still frag­ile and risk ap­petite low, the strain con­tin­ued to show on euro zone pe­riph­ery bonds. Por­tuguese 10-year yields rose 6 ba­sis points (bps) to 3 per­cent PT10YT=TWEB, pulling the gap with Ger­man equiv­a­lents to its widest since Oc­to­ber 2014.

In Italy, with yields up 3 bps at 1.69 per­cent, the gap was the widest since Au­gust last year.

In emerg­ing mar­kets the ten­sions were even more in­tense. Rus­sia's rou­ble RUB= tanked more than 3 per­cent as it set a record low against the dol­lar for a se­cond day run­ning. China stocks .CSI300.SSEC also ended down 3 per­cent af­ter a volatile ses­sion there. That in turn sent MSCI's broad­est in­dex of Asi­aPa­cific shares out­side Ja­pan .MIAPJ0000PUS to a new 4-year low. Ja­pan's Nikkei av­er­age .N225 ended down 2.4 per­cent, adding to its 3.7 per­cent plunge in the pre­vi­ous ses­sion.

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