European stocks rebounded on Wednesday, tracking sharp gains on Wall Street, while banking stocks surged on news that European finance ministers are exploring ways to recapitalise the ailing sector amid growing expectation of a Greek debt default.
At 1118 GMT, the FTSEurofirst 300 index of top European shares was up 2.4% at 908.94 points, after tumbling nearly 5% in the past three sessions. The euro zone’s blue chip Euro STOXX 50 index was up 3.1% at 2,156.16 points.
US stocks swung between gains and losses after reports on jobs growth and American service industries topped estimates and investors watched for progress in Europe?s efforts to tame its debt crisis.
The Standard & Poor?s 500 Index slipped 0.1%b to 1,122.72 at 10:13 am in New York after tumbling as much as 0.7% and gaining 0.4%. The Dow Jones industrial average was down 31.03 points at 10,777.68. The Nasdaq Composite Index was down 15.95 points, or 0.66%, at 2,388.87.
In Euro zone, the gains were paced by banking shares, with Credit Agricole up 9.6%, BNP Paribas up 6.1% and Deutsche Bank up 7.4%, with investors brushing aside concerns over Italy’s finances following an expected credit downgrade by Moody’s. After a dismal two months from late July to late September, the STOXX 600 banking index as well as the STOXX 600 insurance index have broken above their medium-term downward trends, sending a positive signal.
Banks and insurance sectors remain positively correlated with indices, and the interruption of the bearish trend in these two sectors prevents us from playing a decline in indices, Gastaldy said.
The breaking of the support at 1119 in the S&P 500 on Friday fuelled the consensus that the US market should decline further. If this opinion was not so widely shared, we would follow it with ease. Over the past three sessions, the STOXX 50 has retraced about half of its 15 percent recovery rally that started on September 23, but the benchmark index managed to close above 2,084 points on Tuesday, which represents the key 50% retracement of the rally, sending a positive signal.