After a day of choppy trading, European shares ended up over 2.5 percent on Friday. It was the fourth day of gains, boosted by oils and drug companies and a late recovery for banks, though Barclays tumbled after selling a stake to Middle East investors.
Investors had to cope with a whole range of conflicting influences. There was optimism about the cushioning impact of recent interest rate cuts by central banks world wide and concern over how much the economic slowdown could hit companies’ earnings.
In addition there was the temptation of bargain shares whose prices have been battered down in recent weeks, as well as increasing signs that the credit freeze is starting to thaw.
The debate continues on how sustainable this rally might be, with some hoping that the worst could be over for now.
However Gareth Williams, European equity strategist at ING, said: “The general consensus is that it’s a dead cat bounce. But it’s too early to say. There’s a lot of positive signals coming from any kind of valuation-based approach.”
But added: “There are negative signals from the economy. The market may have to test the lows again before investors believe in the rally. The US election may be a catalyst for better sentiment.”