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Wall Street still jumpy but markets recover lost ground

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US markets remained volatile yesterday as investors remained nervous in the wake of this week’s stock rout.

Irish shares gained €1.3 billion on Wednesday as European markets recovered some lost ground.

The Dow Jones and S&P 500 fluctuated throughout the day, but ended in positive territory wit the Dow up 172.25 points, or 0.69 per cent, to 25,085.02 and the S&P rising 6.92 points, or 0.26 per cent, to 2,702.06.

But a sale of 10-year Treasuries saw weak demand, pushing yields close to a four-year high. Stock markets slipped after the auction, with the S &P erasing most of the gains of early morning.

Deal
There was some good news to reassure investors, however. The US senate reached a two-year funding deal, reducing the risk of another government shutdown this week, though it was unclear if the House of Representatives would back the deal. This week’s sell-offs have been prompted about concerns about inflationary pressures in the US as the world’s largest economy continues to perform strongly.

The Iseq index of Irish shares gained 94.48 points or 1.42 per cent to 6,753.19 at the close of business on Wednesday, but was still trailing last weekend’s close of 6,885.23.

That translates as a €1.3 billion gain for shares on the Irish market, which closed with a total value of €94.447 billion.

However they were still collectively worth €1.8 billion less than the €96.294 billion at which they closed on Friday, the last trading day before this week’s rout began.

Traders in Dublin said it was “up, up, up” but cautioned that investors were acting on a belief that the previous two days’ sell-off had left stocks undervalued.

“People are looking for a buying opportunity and they see this as a buying opportunity,” said one.

He added that it was “impossible” to say if the recovery would be sustained through Thursday or the end of the week.

Dealers noted that money from the United States helped bolster European markets generally.

They pointed out that the recovery on this side of the Atlantic gained most of its momentum in the second half of the day as US fund managers began trading.

Markets across the globe tumbled on Monday as investors deserted shares following signs that US inflation could outstrip forecasts, risking a sharp rise in interest rates.

Profits
Such a move could hit company profits as it would drive up their borrowing costs, while making other investments, such as bonds or cash, more attractive.

New York’s Dow Jones index shed 4.6 points on Monday while the Iseq dropped almost 2 per cent.

Investors returned to the market on Wednesday prompting a recovery in US stocks that spread across 10 of the New York stock exchange’s 11 key sectors.

The pivotal measure of volatility on the US market, the VIX, opened at a relatively elevated 31 points, before slipping to 22.62.

The VIX on Tuesday hit a more than two-and-a-half year high above 50, after trading, on average, below 20 for months.

“What we’re seeing is an attempt at stabilisation in US equity prices following a very sharp sell-off,” said Peter Kenny, senior market strategist at Global Markets Advisory Group in New York.

In Europe, the Stoxx 600 Index, which tracks leading shares across 18 markets, rose 2 percent to on Wednesday.

All key industry groups ended the day ahead, with financial stocks doing best, gaining 3.4 per cent through the day.

French and German stocks rallied 1.6 per cent while the euro slid for the second time in a week.

London’s blue-chip FTSE 100 index rose 1.9 per cent to 7,279.42 points, although market watchers noted that it fell 2.6 per cent on Tuesday.

In Dublin, many of the heavyweight stocks gained ground. Global cement giant, CRH, one of Ireland’s biggest companies, gained 1.81 per cent to €28.10.Insulation maker Kingspan soared 3.5 per cent to €36.64.

Packaging manufacturer, Smurfit Kappa, whose customers include Coca Cola and Heineken, fell 1.29 per cent to €27.64 after reporting that profits fell 12 per cent to €576 million last year.

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