Log in
E-mail
Password
Remember
Forgot password ?
Become a member for free
Sign up
Sign up
New member
Sign up for FREE
New customer
Discover our services
Settings
Settings
Dynamic quotes 
OFFON
News: Latest News
Latest NewsCompaniesMarketsEconomy & ForexCommoditiesInterest RatesBusiness LeadersFinance Pro.CalendarSectors 
All NewsEconomyCurrencies & ForexEconomic EventsCryptocurrenciesCybersecurityPress Releases

Calm descends on markets as Portugal fears dwindle

07/11/2014 | 08:20am EDT
The London Stock Exchange building is seen in central London

LONDON (Reuters) - European stocks eked out a gain and Italy paid a record low yield at two bond auctions on Friday, as investors shrugged off any threat of contagion from a Portuguese bank's problems.

European shares were still on track to post their worst weekly fall in three months, however, as investors reassessed stretched valuations for global equities and a slower-than-expected economic recovery in the euro zone.

The pan-European FTSEurofirst 300 <.FTEU3> index was up a third of one percent, but was still on track for a weekly loss of almost 3 percent.

Portugal's PSI 20 index was up 1.4 percent after the country's largest bank, Banco Espirito Santo (>> BANCO ESPIRITO SANTO), reassured investors overnight about financial troubles at its biggest shareholder.

Espirito Santo shares were down 2 percent, however, extending Thursday's 19 percent plunge, which had sent ripples across Europe, U.S. and Asia trading. The losses bucked a months-long trend of low volatility and bullish sentiment towards stock markets driven by steady monetary support from major central banks.

Shares in Portugal's largest listed lender were down more than 30 percent so far this week, easily the worst week on record.

"The market is very confused at the moment, with people not sure about the strength of the economic recovery and worries about structural issues that have not been resolved," Lex Van Dam, a hedge fund manager at Hampstead Capital, said.

Fixed income markets saw little movement. German bund futures <FGBLc1> traded flat and peripheral euro zone bonds, a recent winner for return-hungry investors, saw yields track lower. They had risen sharply on Thursday, when Portuguese 10-year yields <PT10YT=TWEB> fell 10 basis points to 3.91 percent.

The calmer market enabled Italy to sell 7.5 billion euros of bonds, the top of its targeted range, in an auction that sharply contrasted with Greece's three-year bond sale on Thursday, where demand was hurt by fallout from Portugal.

The yield on both the three-year and 15-year paper was the lowest paid at auction since the euro was launched in 1999.

"After the huge rally behind us in non-core bonds as well as equities, we've had a multitude of bad news ... The market clearly needed a trigger for profit-taking and that's what happened," said Jan von Gerich, chief fixed income analyst at Nordea.

Currency markets were largely steady, with the dollar <.DXY> flat against a basket of six major currencies.

Sterling pared gains against the dollar and slipped against the euro after data showed British construction output fell in May, suggesting some sectors in the economy were signs of cooling.

EMERGING CAUTION

U.K. shares were buoyed by merger hopes, as Imperial Tobacco (>> Imperial Tobacco Group PLC) rose 3.4 percent after saying it was in talks with Reynolds (>> Reynolds American, Inc.) and Lorillard (>> Lorillard Inc.) to acquire certain assets and brands from the two companies.

Moves in Asia were generally modest, with share markets mixed. Hong Kong, South Korea, Taiwan and the Philippines lost ground but China, Singapore and Australia eked out gains.

The MSCI Emerging Market index <.MSCIEF> was down 0.5 percent. Emerging-market stocks were set for the biggest weekly loss since the end of May and Indian shares headed for their biggest weekly loss since the end of January.

The catalyst for a more significant emerging markets correction would be a hawkish turn by the U.S. Federal Reserve, Citi strategist Ishitaa Sharma said, predicting the current low-interest rate environment would keep investors chasing carry - the higher yields available in emerging markets.

MSCI's broadest index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> dipped 0.2 percent. Japan's Nikkei <.N225> pared losses to end off 0.3 percent.

Investors were encouraged by signs that funds were taking money out of peripheral euro zone debt and seeking higher returns in the emerging world. MSCI's index of emerging-market stocks actually rose on Thursday having hit a 17-month peak earlier in the week.

As tensions in the Middle East simmered, Brent crude oil <LCOc1> was off 51 cents at $108.16 a barrel. U.S. crude <CLc1> lost 44 cents to $102.49.

(Additional reporting by Patrick Graham, Emelia Sithole-Matarise, Chris Vellacott and Tricia Wright; editing by Larry King)

By Lionel Laurent


© Reuters 2014
Stocks mentioned in the article
ChangeLast1st jan.
IMPERIAL BRANDS PLC 0.03% 1551 Delayed Quote.0.94%
MSCI TAIWAN (STRD) 1.49% 695.372 Real-time Quote.14.63%
NIKKEI 225 -1.80% 27283.59 Real-time Quote.1.23%
PSI 20 INDEX -1.32% 5052.7 Real-time Quote.4.51%
Latest news "Economy & Forex"
06:07aFed's Powell bets economy will navigate new coronavirus surge
RE
06:07aWorld stocks on course for sixth month of gains, dollar near 1-mth low
RE
06:04aThai June exports jump, but virus-outbreak hits consumption
RE
06:03aExclusive-U.S. regulator freezes Chinese company IPOs over risk disclosures -sources
RE
06:01aChevron tops profit estimates, joins share buyback stampede
RE
06:00aU.s. securities and exchange commission has stopped processing initial public offering registrations of chinese companies-sources
RE
05:48aFrance's BNP bolsters profit as state softens pandemic blow
RE
05:48aHong Kong's economic recovery loses steam in Q2, but recovery on track
RE
05:47aGold set for strongest week in 2 months as Fed in no rush to hike rates
RE
05:41aMonzo discloses money laundering probe, losses increase
RE
Latest news "Economy & Forex"