China’s €460bn package helps markets

EUROPEAN markets rallied strongly in early trading yesterday following China’s decision to invest almost €460bn to stimulate its slowing economy.

Dublin’s Iseq index recorded good early gains and was up 4.6% by early afternoon. But some of the surge was lost as Wall St opened lower.

This followed predictions that Goldman Sachs would post its first quarterly loss and Google’s sales would be hurt by the slowing US economy.

As a result by close of trade in Dublin the Iseq index lost much of its earlier gains and was up just 1.6% at the official close, but continued to lose ground in late trading.

It was a mixed day for the Irish banks with AIB down almost 1% to €3.60 and Bank of Ireland, due to report first-half results on Thursday falling over 4.6% to €1.54.

Anglo Irish gained 2.25% to end the day at €2.04 while, among the financials, IL&P gained the most, rising by over 6% to €2.60.

Elsewhere in Europe, where stocks have risen by about 15% over the past two weeks, the Cac 40 in France closed up for the second day in a row at 1.1% while in Germany the Dax rose 1.7%.

In London, the FTSE 100 closed up over 0.8% thanks to China and it shrugged off the $4.3bn (€3.4bn) additional loan loss provisions announced yesterday by HSBC to cover its lending exposure in the US.

Mining stocks in particular gained from the prospects of growing demand from China, analysts said.

Since the credit crunch more than €22 trillion has been erased from the value of global equity markets as credit losses and write downs total €540 billion at present in the worst financial crisis since the Great Depression.

China accounted for roughly 27% of global economic growth last year and the stimulus package “should certainly help in averting a global recession”, Ben Potter, research analyst at IG Markets in Melbourne, said.