Global Stock markets regain stability following EU and US turmoil

World stocks edged up on Thursday from this week’s 11-month low as higher U.S. stock futures calmed frayed investor nerves after a steep selloff, and the euro also rose.

But markets remained jittery and the dollar briefly jumped above 77.00 yen, triggering talk about possible intervention. But dealers reported no action from Japanese monetary authorities and it quickly fell back to 76.65.

Fast-moving rumors about a sovereign rating downgrade of France as well as talk doubting the health of French banks such as Société Générale wirled in Europe, causing the biggest widening in the benchmark index of European credit default swaps on Wednesday since the credit crunch in 2008.

The three major rating agencies later reaffirmed France’s AAA rating, and said its outlook was stable, but markets remain concerned that French banks are among the most exposed to a worsening of Europe’s government debt crisis.

Investors remained reluctant to place long-term bets as trading remained whippy, especially as concerns persisted about the U.S. economic slowdown and uncertainty lingered over how Europe would tackle a sovereign debt crisis that is threatening its banking system.

“The fact that the bears were unable to push markets down to test Tuesday’s lows yesterday may also give the bulls more confidence on the open but any gains may be again short lived as markets still remain negative whilst bullish cues are short on the ground,” said Jonathan Sudaria, dealer at Capital Spreads.

The dollar fell 0.2 percent against a basket of major currencies. The U.S. currency has been under pressure from speculation the Federal Reserve may launch a third bond-buying program to bolster the economy. It has pledged to keep interest rates near zero for two more years.

The yen also briefly fell overnight against the dollar on comments by Japanese Finance Minister Yoshihiko Noda that he would work closely with the global community to maintain market stability.

The euro rose 0.8 percent to $1.4270.

“The ongoing sovereign debt problems are making investors extremely nervous about taking exposure to risk assets. You can’t buy the dollar or the euro, so investors are shifting into the Swiss franc, the yen and gold for safety,” said Tsutomu Soma, senior manager at Okasan Securities in Tokyo.

“I feel further stronger measures by the Fed, the BOJ and other monetary authorities are needed. They need to show their determination to change this risk adverse mood,” he added.

Source: Reuters

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