European markets tried to break their losing streak on Tuesday as investors scooped up stocks that had been pummeled last week.
Shares were also higher in anticipation a rally on Wall Street when it opens after a long holiday weekend.
Weak data from major economies over the last few weeks has diminished confidence in a strong rebound from last year’s recession and unnerved markets, many of which are in the red so far this year. But after days of selling, some investors felt some stocks had become cheap, making it a ripe time to buy.
The FTSE 100 index in London was 2.2 percent or 105.58 points higher, and the DAX in Frankfurt was up 2.1 percent. The CAC-40 in Paris gained 3 percent.
Asian indexes closed higher and Wall Street was expected to rise on the open. After markets in the United States were closed on Monday for the long Fourth of July weekend, futures indexes pointed to a higher open.
The increases are largely attributed to valuation — investors consider many stocks cheap after sharp drops in recent weeks. Analysts are quick to acknowledge that the fundamental outlook for the world economy is not any better than last week — when United States jobs data proved disappointing and surveys showed global manufacturers are bracing for harder times and consumer spending is stuttering.
“This was merely a technical recovery, and we see no convincing evidence of any positive changes in economic fundamentals,” said Zhang Gang, an analyst for Central China Securities in Shanghai.
Investors will closely be watching the Institute for Supply Management’s service-sector index report for any signs of improvement. Economists polled by Thomson Reuters expect the index likely dipped to 55 in June from 55.4 a month earlier. Any reading above 50 indicates the sector is growing.
A better-than-expected report could provide investors with hope that private employers will start to increase the pace of hiring in the coming months, which would boost consumer confidence and likely spending as well. Consumer spending is the biggest driver of economic activity. Retailers report their monthly sales figures Thursday.
With little in the way of indicators this week, many European traders will prepare for central bank policy announcements due Thursday. The European Central Bank and Bank of England are expected to leave their interest rates at historical lows. The European bank will be watched closely for comments on the outlook for economic growth, bank lending, and developments in markets amid the debt crisis.
The European Union has promised to publish bank stress tests in a bid to convince markets that the financial sector is healthier than some fear. Those results could come on July 23, and what the European Central Bank has to say about them could drive market sentiment either way.
In Asia, sentiment was helped somewhat on Tuesday by the Reserve Bank of Australia’s statement on the prospects for the Australian economy, which are closely tied to Chinese demand for its ore and other minerals. Leaving interest rates unchanged after a series of hikes, the central bank said Australia’s economic growth was on track and China’s expansion was “starting to moderate to a more sustainable rate.”
China led Asia’s gains with the Shanghai Composite Index climbing off a 15-month low. The index jumped 45.48 points, or 1.9 percent, to 2,409.42.
Japan’s Nikkei 225 stock index added 71.26, or 0.8 percent, to 9,338.04, and Hong Kong’s Hang Seng rose 1.2 percent to 20,084.10.
