October 2, 2022

Markets Rise as Investors See a Few Opportunities

Stocks recouped losses Tuesday as investors bought up beaten-down stocks. But with Europe’s debt crisis still brewing and Washington yet to approve an increase in borrowing, investors remained wary of pushing the gains too far.

After a hammering Monday that saw bank shares lead a global rout and investors flee to gold and other assets considered safe, markets staged a comeback Tuesday. Oil prices and the euro jumped too.

In morning trading, the Dow Jones industrial average jumped 122.23 points, or 0.99 percent, to 12,507.39. The broader Standard Poor’s 500-stock index rose 12.38 points, or 0.95 percent, to 1,317.82, and the technology-heavy Nasdaq composite gained 44.37 points, or 1.60 percent, to 2,809.48.

In Europe, the FTSE 100 index of leading British shares was up 0.73 percent at 5,794.60 points, while Germany’s DAX rose 1.25 percent to 7,195.03. The CAC 40 in France was 1.29 percent higher at 3,697.97 points.

However, the factors that contributed to the previous day’s slump remain unchanged, including concerns that Europe’s debt crisis could swallow Italy and Spain and that the United States won’t raise its debt ceiling in time to avoid a default.

Analysts warned that these will remain the predominant concern of investors.

“In spite of a positive opening call for European equities, we would advise caution,” said Neil MacKinnon, global macro strategist at VTB Capital.

Housing starts in the United States rose more than expected in June, reaching a six-month high, and permits for future construction unexpectedly increased, the Commerce Department reported on Tuesday.

Investors on Wall Street took in quarterly earnings announcements from three major banks: Goldman Sachs reported a profit of $1.05 billion, a relatively weak showing; Bank of America said it lost $8.8 billion, in line with expectations as it settled legal claims related to its troubled mortgage division; and Wells Fargo reported a 29 percent increase in profit, as loan losses eased.

The main point of interest in Europe this week will probably be Thursday’s meeting of European Union leaders in Brussels. They are due to discuss a second bailout package for Greece, which relies on such lifelines to meet its obligations.

Just two days ahead of the meeting, it remains unclear whether a mechanism whereby Greece avoids a default will be clinched. If the credit rating agencies say Greece is in default following the bailout package, then there are real worries in the markets of renewed instability.

The euro has largely managed to withstand pressures of a potential Greek default in recent weeks, and was trading 0.3 percent higher at $1.4170.

Markets are also keeping a close watch on developments in the United States, where lawmakers are wrangling over raising the debt ceiling, which caps the amount of government borrowing. The limit must be raised by Aug. 2, or Washington could be forced to choose who to pay back and who not to — in other words, to default.

Observers say that politicians are using the debate to grandstand ahead of 2012 elections and are unlikely to actually let the date pass without raising the ceiling, but the dithering is harming investor confidence.

“There has not been a sincere change overnight in sentiment toward the debt issues suffered in the euro zone and the United States,” said Giles Watts, the head of equities at CityIndex. “Investors remain uneasy about the situation as a whole.”

Earlier, some Asian stocks pared some of their early losses after the European open, but still ended mostly down. Japan’s Nikkei 225 stock average extended losses to decline 0.9 percent to 9,889.72 after being closed for a national holiday Monday. Hong Kong’s Hang Seng rebounded to gain 0.5 percent to 21,902.40 while mainland China’s Shanghai Composite Index fell 0.7 percent to 2,796.98.

Oil prices reached $97 a barrel amid expectations that United States crude supplies dropped last week. Benchmark oil for August delivery was up $1.08 to $97.01 a barrel in trading on the New York Mercantile Exchange.

Article source: http://feeds.nytimes.com/click.phdo?i=a85e324b9f7a4a70cfc12f8466764974

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