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US, European stocks rebound after selloff

Pressure on US, European borrowing costs eases

By AFP - Sep 29,2021 - Last updated at Sep 29,2021

People walk near Wall Street in the financial district of Manhattan on Wednesday in New York City (AFP photo)

LONDON — US and European stock markets rebounded on Wednesday, a day after a selloff over a slew of concerns including high energy prices, rising bond yields and the threat of a US debt crisis.

Investors were back in a buying mood as oil prices dipped back under $80 while pressure on US and European borrowing costs eased on Wednesday.

Markets have also fretted over a US Congress deadlock over raising the debt ceiling, which could cause the world's top economy to go into default for the first time.

Wall Street opened higher on Wednesday following a rout a day earlier.

London's FTSE 100, the DAX in Frankfurt and the Paris CAC 40 were all up in afternoon trading, though they eased off earlier gains.

Tech stocks, which tend to suffer when bond yields rise, "are finding some reprieve from the stabilisation in rates," said Charles Schwab analysts in a note.

"Volatility is likely to persist due to growing expectations of tightening global monetary policy and the continued debt ceiling stalemate in Washington, which has accompanied the rise in Treasury yields," they said.

London shares were buoyed partly by a weak British pound, which hit a January-low at $1.35 on fears of stagflation, or a vicious mix of high inflation and low economic growth.

The dollar also strengthened against the euro and the yen.

Oil prices dipped one day after Brent had surged close to a three-year peak above $80 on tight global supplies.

"European stock prices have become cheaper, given the sell off we have seen during the past few days, and this has brought some bargain hunters into the markets," AvaTrade analyst Naeem Aslam said.

Europe's bourses had stumbled earlier this week on high oil prices, political impasse in Germany and US debt concerns.

Wednesday's rebound was also driven by hopes of a deal to avert a potentially catastrophic US debt default, according to Swissquote analyst Ipek Ozkardeskaya.

"The rebound we see is a correction of the latest selloff, and is certainly fuelled by the expectation (of) an eventual deal on the US debt ceiling," she said.

Tokyo ends 'strong run' 

However, Asian markets mostly fell Wednesday following the rout on Wall Street as investors fret over surging inflation, the end of the Federal Reserve's financial support and the US debt standoff.

Ongoing worries about the potential collapse of Chinese property giant Evergrande, an energy crunch in China and the ever-present spectre of the Delta coronavirus variant also soured the mood.

Tokyo's main stocks index tanked more than two percent, having enjoyed a strong run in recent weeks on hopes for more stimulus from a new Japanese prime minister.

The ruling party elected former foreign minister Fumio Kishida its new leader Wednesday, putting him on course to take the mantle of Yoshihide Suga.

However, Hong Kong, Singapore, Manila and Jakarta rose.

Oil prices sagged after data pointed to a drop in US stockpiles, though analysts expect the commodity to maintain its strength for the foreseeable future.

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