Global stocks bounce back

Global stocks recouped losses Tuesday as investors bought up beaten-down stocks but with Europe's debt crisis still brewing and the US yet to sanction an increase in its debt ceiling, investors remain wary of pushing the gains too far. After a hammering Monday that saw bank shares lead a global rout and investors flee to gold and other safe haven assets, markets staged a comeback yesterday. Oil prices and the euro jumped too. However, the factors that contributed to the previous day's slump remain unchanged, including concern that Europe's debt crisis could swallow Italy and Spain and that the US won't raise its debt ceiling in time to avoid a default. Analysts warned that these will remain the predominant concern of investors. "In spite of a positive opening call for European equities, we would advise caution," said Neil MacKinnon, global macro strategist at VTB Capital. In Europe, the FTSE 100 index of leading British shares was up 0.6 per cent at 5,784 while Germany's DAX rose 1.5 per cent to 7,216. The CAC-40 in France was 1.4 per cent higher at 3,701. Wall Street was also poised to rally at the open Dow futures were up 0.6 per cent at 12,401 while the broader Standard & Poor's 500 futures rose 0.7 per cent to 1,310. The main point of interest this week will likely be tomorrow's meeting of European Union leaders in Brussels. They are due to discuss a second bailout package for Greece, which relies on such lifelines to meet its obligations. Just two days ahead of the meeting, it remains unclear whether a mechanism whereby Greece avoids a default will be clinched. If the credit rating agencies say Greece is in default following the bailout package, then there are real worries in the markets of renewed instability. The European Central Bank, for example, has warned it won't accept Athens' bonds as collateral for the money it loans it. That would mean Greek banks would need to find another source of funding. Germany, the EU's biggest economy, wants private bondholders to absorb some losses on Greek bonds which the agencies have previously stated would likely constitute a default. The euro has largely managed to withstand pressures of a potential Greek default in recent weeks, and was trading 0.3 per cent higher at $1.4170 (Dh5.2045). Markets are also keeping a close watch on developments in the US, where lawmakers are wrangling over raising the debt ceiling, which caps the amount of government borrowing. The limit must be raised by August 2, or Washington could be forced to choose who to pay back and who to stiff in other words, to default. Observers say that politicians are using the debate to grandstand ahead of 2012 elections and are unlikely to actually let the date pass without raising the ceiling, but the dithering is killing investor confidence. "There has not been a sincere change overnight in sentiment toward the debt issues suffered in the Eurozone and the United States," said Giles Watts, the head of equities at CityIndex. From / Gulf News