World stocks edged away from this week’s two-week lows on Friday as a recent sell-off attracted investors looking for bargains, while major currencies held steady ahead of a meeting of Group of Seven finance chiefs.
Higher crude oil prices on the back of expectations that cold U.S. weather would boost fuel demand supported energy stocks, while firmer commodity prices including gold and platinum underpinned emerging market assets.
The six-month-old credit crisis has hit balance sheets of major investment banks exposed to the U.S. subprime mortgage sector, threatened to hit corporate profits and drag down the real economy.
Such concerns briefly pushed some sectors of Wall Street this week into a bear market — a cycle that starts when an index falls 20 percent from a recent market peak.
While this presents good buying opportunities from a valuation point of view, investor sentiment remains fragile, putting the focus firmly on a weekend meeting of G7 finance ministers and central bankers in Tokyo which will discuss policy responses to the deteriorating economic climate.
“Ministers have more serious issues to talk about than currency markets this time,” said Haruhisa Takagi, head of FX spot trading at Sumitomo Mitsui Bank.
“The market remains concerned about further fallout from the credit market crisis … euro zone economies seem slowly being dragged down by the U.S. economic downturn.”
The FTSEurofirst 300 index was up 1.3 percent, recouping most of the losses made on Thursday.Â
The dollar was steady at 107.65 yen JPY while the euro held near Thursday’s two-week low against the U.S. currency at
$1.4469
The single currency came under pressure on Thursday after European Central Bank President Jean-Claude Trichet paved the way for lower interest rates this year by stressing downside euro zone growth risks.
The ECB left rates on hold at 4 percent on Thursday.
“It was more than just opening the door a little bit (for a cut). We think they will cut by 50 bps this year,” said Teis Knuthsen, head of FX research at Danske Bank in Copenhagen.
“There is a good chance now that it will be brought forward. Our analysis that markets would increasingly speculate on rate cuts has certain been correct and I think Trichet is slowing moving in that direction as well.” (Reuters)
