Rollercoaster day ends on upswing after European rally

MARKETS WRAP:A LATE rally on European stock markets saw a volatile day for investors end on an upswing, as speculation intensified that central banks will step in to take co-ordinated global measures to prevent a major financial catastrophe.

Buyers and sellers ebbed and flowed on a rollercoaster day for markets, but surges in banking stocks across Europe in the final hour of trading pushed markets into positive territory.

In Dublin, where the Iseq closed up 1.6 per cent, the main stock driving gains was Ryanair, which advanced more than 7 per cent after crude oil prices sank to a six-week low. Cement-maker CRH, the largest stock on the index, also drove the market, finishing up 1.5 per cent.

These performances helped the Iseq outperform markets in London, Frankfurt and Paris, although they too finished the session with gains that belied the ongoing turmoil in the global economy and financial system.

The FTSE closed up 0.5 per cent, with the German Dax rising 0.6 per cent and the French Cac up 1 per cent.

Across Europe, it was a recovery in bank stock prices that drove the late rise in values, with investors reassured by rumours that French banks are on track to receive some kind of capital injection to shore up their balance sheets.

Financial stocks were also buoyed by comments from European Central Bank governing council member Ewald Nowotny, who indicated that policymakers may reintroduce 12-month loans to banks to ease funding strains.

This took some of the pressure off markets after a grim session on Thursday, when a dark economic outlook from the US Federal Reserve and downbeat manufacturing data from China heightened fears the global economy could be heading back into recession and wiped billions off commodity stocks.

Notwithstanding yesterday’s late gains, equity markets have endured something of a rout in recent days, with September proving to be a nervy month for investors.

The Iseq index fell 3.7 per cent this week, wiping €1.2 billion from the value of Dublin-listed stocks. The FTSE declined 5.6 per cent this week, taking £81 billion off its value.

With a week left to go, the third quarter of 2011 has proven to be the second worst for global stocks in the near 24 years that the MSCI all-country world share index has been running. – (Additional reporting: Reuters)