World stock markets steady but wary, watching US moves

By Deutsche Presse-Agentur dpa Oct 1, 2008, 14:54 GMT

A trader works on the floor of the New York Stock Exchange at the start of the trading day in New York, New York, USA, on 01 October 2008. Worldwide financial markets are waiting for the United States Congress to act on financial legislation. EPA/JUSTIN LANE

Stock markets around the world were in a wait-and-see mode Wednesday despite the strong rebound on Wall Street the day before, watching political developments in Washington and the efforts there by Congress to agree on a finance sector rescue plan.

The US Senate was due later Wednesday to hold an emergency vote on a revised version of a 700-billion-dollar rescue package, two days after the lower House of Representatives defeated a rescue bill.

Meanwhile markets around the world were fluctuating slightly in both directions in an ongoing mood of wariness about the US rescue efforts despite Wall Street's strong showing Tuesday, when the Dow Jones Index powered ahead by 485 points. The gain followed the huge 777-point fall on Monday.

In Tokyo, the benchmark Nikkei 225 Stock Average gained 108.4 points, or 0.96 per cent, to close at 11,368.26. The broader Topix index of all first-section issues was also up 13.72 points, or 1.26 per cent, at 1,101.13.

  Australian shares soared Wednesday, with the ASX200 closing 194 points, or 4.2 per cent, higher at 4,794. The gain more or less equalized the 4.2 per cent drop by the ASX200 on Tuesday.

The strongest gains as of mid-afternoon were registered in London, where the FTSE Index was up 1.6 per cent to 4,980.3 points. Bank shares rallied, with the recovery spearheaded by Halifax Bank of Scotland (HBOS), which after a battering Tuesday saw its share price rise by more than 30 per cent to 167.9 pence.

In Frankfurt, the 30-share DAX was running 0.6 per cent lower at 5,799 points as of mid-afternoon. Continuing a double-digit recovery was mortgage lender Hypo Real Estate - the recipient of a huge government-banking bail-out deal on Monday. At mid-afternoon HRE shares were 15 per cent higher at 5.1 euros.

In Paris, the CAC-40 stood at around 4,015 points at mid- afternoon, down some 17 points or 0.4 per cent.

In Milan, the benchmark S&P/MIB was a tiny 0.14 per cent lower at 25,494 points at mid-afternoon. Standing out in the crowd was banking group Unicredit, whose shares were running 6.6 per cent stronger at 2.77 euros.

In Madrid, the main Ibex-35 index was at 11,107 points in the afternoon, down 1.09 per cent from yesterday.

In Austria, Vienna's main ATX index gained 1.55 per cent as of 1330 GMT, after having started the day with a 3.8-per-cent rise. With banking shares still under some pressure, Erste Group Bank rose 0.64 per cent, while Raiffeisen International Bank gained 0.58 per cent.

In Amsterdam, the AEX at mid-afternoon was 1.09 per cent higher at 335.07 points. However, the reading indicated a slight slippage after the AEX had surged to 335.66 points just after opening.

In Scandinavia, Stockholm's main index was up a slight 0.2 per cent, but in Oslo, the market was down 1.5 per cent in a decline attributed to dropping oil prices. In Helsinki, the OMX Helsinki 25 was up 0.87 per cent while the OMX Copenhagen 20 list was 0.4 per cent higher. But the OMX Iceland 15 index was down 0.3 per cent.

Besides the political developments in Washington over a rescue plan, efforts were afoot in Europe for key countries to meet to review the international economy and markets situation.

The four European members of the G8 group of leading industrial nations are to meet Saturday in Paris to discuss a European response to the economic crisis, Luxembourg Prime Minister Jean-Claude Juncker disclosed.

Officials of the G8 members France, Germany, Italy and Britain, were to be joined by European Central Bank head Jean-Claude Trichet and Juncker as head of the Eurogroup of eurozone finance ministers.

In a parallel development, the European Union's executive body on Wednesday called for tighter rules on bank security and supervision as the global financial storm showed no signs of abating.

'We have just approved a proposal for reform of the capital requirements of financial companies ... This important and far- reaching proposal will be followed very quickly by a proposal on reforming the rules on rating agencies,' the head of the European Commission, Jose Manuel Barroso, told journalists in Brussels.

On a related note, OECD head Angel Gurria warned that despite assurances by European leaders that their finance systems were stable, Europe may still need a massive rescue plan similar to the 700-billion dollar measure being voted on by the US Congress.

Presenting the OECD's annual world economy outlook report to the Parliamentary Assembly of the Council of Europe in Strasbourg, Gurria said, 'We have already seen the first troubled European banks being rescued in the United Kingdom, Belgium, the Netherlands and Germany.

'Considering the exposure of European financial institutions, we might have to start thinking of a systemic plan for Europe if things don't improve on the other side of the Atlantic. The piecemeal approach may not work in Europe either,' he said.