European stock markets in jittery recovery

[LONDON] European stock markets mounted a modest recovery Wednesday but Wall Street appeared headed for more volatility a day after spectacular price swings kept breathless investors on the edge of their seats.

Earlier, Asian stocks had failed to profit from a late Tuesday upswing in New York as markets nervously pondered the outlook for leading interest rates and their potential impact on economic growth.

"Coming off yesterday's whipsaw session that saw a sharp upside reversal, US stocks are giving back some gains in early action, with the recent spike in volatility keeping the markets skittish," analysts at the Charles Schwab brokerage said.

The Dow index was down around 0.3 per cent at the start of trading, but price fluctuations appeared again to be rapid.

"Volatility is back, and investors had better get used to it," said Lee Wild, head of equity strategy at Interactive Investor.

Key European markets clawed back around a third of the previous day's sharp losses.

Following recent strong gains, a global stocks sell-off began Friday when bright US unemployment data sparked concern of high inflation and in turn faster-than-expected increases to US interest rates.

Wild noted that "just as markets cannot keep rising forever, they must also stop falling at some point, but it's still unclear whether we've reached a level where buyers see value again".

In Asia, traders began the day on a bright note as they took their lead from a recovery on Wall Street overnight.

However, as the day wore on selling began to kick in. By the end of its session, Tokyo had added just 0.2 per cent - having opened almost three per cent up - while Shanghai lost 1.8 per cent and Seoul plunged 2.3 per cent by the close.

Analysts have been eyeing an increase in US bond yields that has been triggered in large part by a recent weakening of the dollar.

The US dollar continues to be the main driver on the currency markets due to "the perception the Fed are going to be more hawkish than anticipated this year," said David Madden, market analyst at CMC Markets UK.

"There (are) growing concerns (that) the US central bank will hike interest rates four times this year." Bitcoin meanwhile surged once more, to around US$8,000, a day after it slid to stand below US$6,000 for the first time since mid-November.

Despite Wednesday's strong recovery, it remains well down on its record high of almost US$20,000 reached just six weeks ago.

AFP