European stocks rebound as Wall Street attempts comeback

LONDON: European equities turned around an early weak trend Wednesday, lifted by Wall Street which had a fresh go at recouping losses seen at the start of the week.

US stocks had already attempted a comeback on Tuesday from the previous day's heavy losses, but late jitters undermined the recovery.

Dealers said, however, there was no guarantee the rebound in European stocks would last, given deep uncertainty over the conditions of Britain exiting the European Union, and a damaging standoff between Italy and the EU over Rome's budget.

A slowdown in powerhouse Germany's economy is also a worry, they said, after it shrank 0.2 percent in the third quarter, in news which sent the euro sliding against the dollar.

The pound was under pressure as Prime Minister Theresa May defended her divorce deal with the EU before rowdy lawmakers before trying to win the backing of her splintered cabinet.

"Uncertainty around Italy and Brexit are weighing on sentiment," noted CMC Markets analyst David Madden.

- 'Hot tin roof' -

But the weakness in both the European currencies actually helped the continent's stock markets which stand to gain when multinationals' foreign earnings translate into higher profits when they report in euros or pounds.

Italy's populist government defied the European Commission by sticking to a big-spending budget plan, risking financial sanctions in a high-stakes standoff that could spell fresh trouble for the eurozone.

"The Italian government made no changes in relation to their budget proposal, and Italian government bond yields are higher on the back of it as dealers are nervous about the potential fallout," Madden said.

Sterling had won a major boost Tuesday after Britain and the European Union revealed they had reached a draft Brexit deal.

But hardline Brexiteer MPs have warned they will seek to block it in parliament.

Most ominously for May, the Northern Irish Democratic Unionist Party (DUP), which props up her government, threatened to break their alliance over reports of a special arrangement for the British province.

"The pound is behaving like a cat on a hot tin roof -- leaping to a month high on Tuesday before sagging on Wednesday as the DUP's reservations about the government's Brexit gambit emerged," said David Lamb, head of dealing at Fexco Corporate Payments.

- 'Aggressive momentum' -

"After two years of potholed progress, Britain's Brexit negotiations are approaching the end of the road. Expectations, and heartbeats, are accelerating - but it's still not clear if what lies beyond is a smooth exit lane or an abyss."

Oil prices, meanwhile, clawed back some of the sharp losses this week seen on oversupply fears just as demand falters in the face of the China-US trade war and easing economic growth.

Prices are, however, still more than a fifth down from their four-year highs seen in early October.

"The dramatic selling across the oil markets in recent days has come to a brief pause," said Jameel Ahmad, head of market research at FXTM, "but many remain stunned by the acceleration in aggressive momentum that has transpired over the past couple of sessions".

- Key figures around 1435 GMT -

London - FTSE 100: UP 0.8 percent at 7,108.56 points

Frankfurt - DAX 30: UP 0.7 percent at 11,552.65

Paris - CAC 40: UP 0.5 percent at 5,127.98

Milan - FTSE MIB: FLAT at 19,229.42

EURO STOXX 50: UP 0.4 percent at 3,238.82

New York - Dow: UP 0.7 percent at 25,485.01

Pound/dollar: DOWN at $1.2946 from $1.2977 Tuesday

Euro/dollar: DOWN at $1.1285 from $1.1290 at 2200 GMT Tuesday

Dollar/yen: UP at 113.96 yen from 113.81 yen

Tokyo - Nikkei 225: UP 0.2 percent at 21,846.48 (close)

Hong Kong - Hang Seng: DOWN 0.5 percent at 25,654.43 (close)

Shanghai - Composite: DOWN 0.9 percent at 2,632.24 (close)

Oil - Brent Crude: UP $1.12 at $66.59 per barrel

Oil - West Texas Intermediate: UP 86 cents at $56.55