World Markets Close Mostly Higher on US Rally

By THE ASSOCIATED PRESS
Published: December 2, 2008
Filed at 6:10 p.m. ET
LONDON (AP) -- A rebound on Wall Street provided a lift Tuesday to most world stock markets outside of Asia, where shares slumped overnight.
The Dow Jones industrial average finished up 3.3 percent at 8,419.09 as investors bought back into equities after the savage retreat on Monday, when the blue-chip index closed down almost 700 points, or 7.7 percent, wiping out more than half of last week's gains.
Monday's losses caused Asian markets to dive. Japan's Nikkei 225 stock average tumbled 533.53 points, or 6.4 percent, to 7,863.69, and Hong Kong's Hang Seng index lost 5 percent to 13,405.85.
European stock markets showed little direction before the positive open of U.S. markets, then closed higher, tracking the recovery on Wall Street.
The FTSE 100 closed 1.4 percent higher at 4,122.86, helped by a 12.5 percent jump in the share price of British Airways PLC, which said it is in merger talks with Australian rival Qantas. Tesco shares soared 13.0 percent after reporting upbeat sales in the third quarter.
The CAC-40 index in France closed 2.4 percent higher at 3,152.90, while Germany's DAX was the best performing major European index, up 3.1 percent at 4,531.79, as car companies such as Daimler AG and Volkswagen AG recouped most of the previous session's losses.
The recovery in European and U.S. stocks on Tuesday was largely a reaction to Monday's heavy losses, when a run of bad data increased fears of a prolonged and deep global economic downturn.
It all culminated with Monday's announcement by the National Bureau of Economic Research, considered the arbiter of the U.S. economic cycle, that the world's largest economy entered a recession in December 2007, much earlier than most predictions.
''If the U.S. economy is entering a depression, it is far too soon, even for an equity market that tries to discount conditions six months or a year ahead, to be looking for economic recovery,'' said Stephen Lewis, chief economist at Monument Securities.
The optimism that saw U.S. stocks rise for five straight days last week for the first time since July 2007, has all but evaporated amid renewed worries about the global economy. The data expected out of the U.S. over the rest of the week, including Friday's closely watched jobs report for November, are expected to make for further grim reading.
Despite the recession which has taken hold across the developed world, some companies are managing to post solid performances. One notable example was British supermarkets chain Tesco PLC, which saw its share price rise Tuesday by over 13 percent after it reported like-for-like sales, excluding revenues from its gas pumps, up 2 percent during the third quarter.
''Yet again Tesco has defied the laws of gravity, kicking market recession fears firmly in the teeth,'' said Howard Wheeldon, senior strategist at BGC Partners.
Tesco will be hoping that the widely anticipated 1 percentage point rate reduction Thursday from the Bank of England will help entice shoppers in the crucial Christmas season. The European Central Bank is also expected to cut its benchmark rate by at least half a percentage point on Thursday.
Latin American shares closed mostly higher as bargain hunters swooped in a day after stocks were dragged down by the selloff on Wall Street.
Brazil's Ibovespa stock index was up 0.8 percent to close at 35,001, while Mexico's IPC rose by 269 points, or 1.4 percent, to 19,802, Colombia's IGBC edged up 0.8 percent to 7,232 and Argentina's Merval index jumped 2.9 percent to 952.
Chile's IPSA index was the exception, dipping 0.7 percent to close at 2,318.
Earlier, Australia's central bank slashed its key interest rate Monday a full percentage point to 4.25 percent in an attempt to prevent the economy from sliding into recession. But investors took scant comfort from the move, sending the benchmark S&P/ASX 200 index down 4.2 percent to 3,528.2.
Benchmarks in the Philippines, Taiwan, India and South Korea also dropped sharply.
Markets on mainland China were mixed, with food processors up following a lifting of price controls but banks down on economic jitters. The benchmark Shanghai Composite Index slipped 0.3 percent, while the Shenzhen Composite Index rose 1.4 percent.
Light, sweet crude for January delivery fell more than 4 percent, or $2.32 to settle at $46.96 a barrel on the New York Mercantile Exchange. Earlier Tuesday prices briefly fell to $46.82, the lowest level since hitting $46.20 intraday on May 20, 2005.
In currencies, the euro inched up to $1.2697 in late New York trading from $1.2672 late Monday, while the British pound fell to $1.4876 from $1.4910 and the dollar slipped to 93.22 Japanese yen from 93.40 yen.
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Associated Press Writers Pan Pylas in London and Tomoko A. Hosaka in Tokyo contributed to this report.