Install

Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

European Stocks Rise After Dow Gain

LONDON -- Stocks and bonds rose in Europe on Tuesday as investors were split between gloom over the threat of a global recession and hope that Monday's thumping rally would extend when Wall Street reopened.

The dollar fell against the Swiss franc and yen as worried investors brought money home or sought safe havens while oil regained its poise after its biggest one-day fall in a decade prompted by fears of lower overall demand.

European shares fought back from early losses of as much as 2 percent to stand half a percent higher by midday, following movements in U.S. equity futures.

The pan-European FTSE Eurotop 300 index was up 1 percent, cutting its losses since the attacks on the United States to just below 10 percent.

U.S. S&P 500 index futures were 2.5 points higher at 1,010.

"Today we should beware the profit taker," said David Buik of Cantor Index.

"The fundamentals have not changed. Profit warnings continue to proliferate. ... The military hostilities have yet to start, and some sort of sharp slowdown/recession is staring the world in the face," he said.

Wall Street staged a massive relief rally Monday, with the Dow Jones Industrial Average jumping 4.47 percent after slumping 14.26 percent last week.

But investors have been bedeviled by fears that the attacks, and expected military retaliation, would keep consumers at home, casting the United States and the rest of the world into a slump.

Energy led the sectoral losers with a 2.6 percent drop as crude prices stabilized at weaker levels. Royal Dutch fell 2 percent, Shell 3.8 percent and BP dropped 1.7 percent.

A profit warning from British-based music giant EMI sent the stock down 36 percent.

Italian luxury goods maker Gucci fell 2.2 percent after issuing a profit warning along with forecast-topping second quarter results, but clawed back some of its losses to stand 1.7 percent lower following Monday's 21 percent gain.

Gucci said the Sept. 11 attacks would hit the luxury goods sector and had forced it to cut its full-year forecast. The group also said it planned to buy back about 3.5 million shares periodically, subject to market conditions.

But Coca-Cola cheered markets by saying it would meet its earnings target for the year and sees solid sales growth in the third quarter.

Gold, a usual haven in times of turmoil, fell about $1 an ounce to $288.00.

Earlier in Asia, Japan's Nikkei 225 average closed 1.45 percent higher but failed to hold early session gains of more than 3 percent.

Short-term European government debt yields fell back toward recent two-year lows after oil prices fell.

Yields on the longer end of the market, which was earlier lagging the short end, received fresh impetus after Germany detailed its around 27.2 billion euros auction schedule for the fourth quarter, which included plans to issue six-month Bubills, 138 five-year Bobl top-up and new two-year notes.

"The most recent move in Bunds can be explained by the new debt plan out of Germany. There won't be a tender for 10-year Bunds and that triggered some buying," said Charles Berry, trader at LBBW."

The interest-rate-sensitive two-year Schatz was yielding 3.502 percent, down 3.3 basis points. The 10-year Bund yield was down 4.8 basis points at 4.848 percent.

Analysts said the yen was continuing to benefit from repatriation flows ahead of book closing for the end of the first half of the fiscal year, while the Swiss franc remained buoyant in a general atmosphere dominated by risk aversion.

"The rally in U.S. equities on Monday proved to be a false dawn. The main driver in the foreign exchange market is still risk-averse flows. The dollar is going to be under pressure going forward," said Nick Stamenkovic, senior strategist at Nomura International.

"The key focus is on U.S. consumer confidence and it is likely to result in a sharp fall. ... We saw a fall of 20 points or so when the Gulf War broke. So this time the risk is also on the downside," he added.

The dollar was down by more than a third of a percent against the yen compared with the New York close, hovering around 117. Against the Swiss franc, it was off by almost a third of a percent at 1.5827. The dollar was almost flat against the euro at around $0.9180 with the European single currency also off against the Swiss franc and the yen.

The markets were also nervous about a U.S. consumer confidence report that was expected to be released later in the day. The report was widely expected to show falling confidence as the Sept. 11 attacks on New York and Washington take their toll on sentiment.

It could also signal a slowdown in retail spending, with concerns rising that the U.S. economy, already sluggish before the attacks, now threatens to tip into recession.

According to a Reuters poll, the September index is forecast to show a fall to 105.1 from the eight-year low of 114.3 the previous month.