| DATE: 2010-05-27 | PRINT |
LONDON, May 27, 2010 (AFP) - World stock markets jumped higher on Thursday, extending the previous day's large gains on easing concerns over the eurozone debt crisis and Korea, dealers said.
Frankfurt leapt 2.24 percent, London rose 1.79 percent, Madrid gained 1.44 percent and Paris put on 1.94 percent.
The strong performance mirrored gains earlier in Asia, where Tokyo bounced 1.23 percent higher and Hong Kong rose 1.22 percent despite modest losses overnight on Wall Street.
"The two great weights currently dragging down global markets -- eurozone debt woes and rising tensions between North and South Korea -- appear to have eased slightly today," said IG Index analyst Will Hedden.
"This combination of factors is propelling the FTSE and other euro markets higher for now."
In foreign exchange trade on Thursday, the European single currency rose to 1.2274 dollars in late morning London deals, having dived close to a four-year low earlier this week on eurozone jitters.
Global stock markets had sprinted ahead on Wednesday, driven higher by reports of brighter global growth prospects and as investors hunted for bargains after recent heavy losses brought on by European debt fears.
Several key eurozone members, including Italy and Spain, are struggling to contain public debt and deficits that have eroded confidence in the euro and sent it plunging against the dollar in recent weeks.
The troubles, which began with Greece, have dealt a blow to the shared currency, hammering confidence and hurting global exporters dependent on Europe for their sales.
"The euro reprieves, when they emerge, remain uninspiring," said Credit Agricole CIB analyst Daragh Maher.
"It remains hard to come up with a compelling case to buy the euro on an ongoing basis," Maher added.
Italy, meanwhile, faced the prospect of a general strike next month in protest at the government's austerity measures, announced this week, worth nearly 30 billion dollars and aimed at stabilising public finances.
The Spanish government approved last week a new 15-billion-euro austerity package which includes a five-percent pay cut for civil servants and a freeze on pensions.
Those cuts, which are to be submitted to parliament on Thursday, are on top of a 50-billion-euro (63-billion-dollar) austerity package announced in January as Madrid tries to put its public finances in order.
Earlier this month, the EU and the International Monetary Fund pledged a 750-billion-euro aid package of loan guarantees and credits for troubled eurozone nations to help stem the crisis and support the euro.
The EU/IMF had already agreed to an unprecedented 110-billion-euro bailout package for Greece.
"The joint EU/IMF support packages may have provided Greece with some breathing space but it will not prevent years of economic hardship," said Capital Economics analyst Jonathan Loynes.
"Whatever its actions, the (Greek) government has no choice but to return its huge budget deficit to balance.
"Once it has achieved this, Greece's best hope of avoiding a 'lost decade' may be to default and quit the euro."
The single currency was pressured by a report -- later denied -- that China, the world's largest holder of foreign exchange reserves, was reviewing its holdings of eurozone debt.
"The euro has continued to remain under pressure after a report from the Financial Times suggested that China's State Administration for Foreign Exchange (SAFE) was reviewing its exposure to European denominated assets," said CMC Markets analyst Michael Hewson.
"This has caused some concern seeing as they own over 500-billion-euros worth."
The Financial Times said China was reviewing its eurozone debt holdings in view of the accelerating crisis in Europe, and added that SAFE officials had met foreign bankers on the issue in Beijing in recent days.
However, SAFE responded on its website: "The report is baseless."
"China's foreign exchange reserves (agency), as a responsible long-term investor, has always held a diversified investment strategy.
"The European market was and is one of the most important investment markets for (China's) foreign exchange reserves and will remain so in the future.
"We support the package of measures the European Union and the International Monetary Fund are taking for the sake of financial stability," SAFE added in its statement.
