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European markets rebound despite fears of global slowdown

LONDON, COUNTY (OPTIONAL), UNITED KINGDOM - 2021/09/15: A view of the London City skyline, seen from London Bridge. (Photo by Thomas Krych/SOPA Images/LightRocket via Getty Images)
The pound is suffering as a consequence of the fuel crisis that has seen petrol station forecourts run dry, as concerns mount about an economic slowdown. Photo: Getty

European stock markets advanced on Wednesday, staging a modest rebound after a sell-off in the previous session.

In London, the FTSE 100 (^FTSE) rose 1.2% during the session, aided by a falling pound, while the French CAC (^FCHI) gained almost 1% and the DAX (^GDAXI) was more than 0.8% higher in Germany.

“Once again it is fears about surging energy prices, supply chain disruptions, and concerns about more persistent inflation that is sparking a move out of the more highly valued areas of the stock market, as the volatility that we saw last week, continues into this week as bulls and bears indulge in a game of pass the parcel,” Michael Hewson, chief market analyst at CMC Markets, said.

“The pound is also suffering as a consequence of the entirely self-inflicted fuel crisis that has seen petrol station forecourts run dry, and concern over an economic slowdown.”

Read more: Inflation fears: UK supply chain cost pressures filter into prices

On Tuesday, the pound suffered its biggest one-day drop against the dollar this year, tumbling 1.3% to just under $1.3530 amid inflation fears. It was its lowest level since January, as investors sought safe haven in the dollar.

Pound chart
Pound chart. Source: Yahoo Finance UK

Traders will also have their eyes on the policy panel at the European Central Bank (ECB) forum on central banking featuring ECB president Christine Lagarde, Fed chair Jerome Powell, Bank of Japan (BoJ) Governor Kuroda and Bank of England (BoE) governor Andrew Bailey. Tihsis set to take place at 16:45pm UK time.

Across the pond, the S&P 500 (^GSPC) rose 0.5% and the tech-heavy Nasdaq (^IXIC) gained 0.3% at the time of the European close. The Dow Jones (^DJI) edged almost 0.6% higher.

Treasuries stabilised after the yield on the 30-year note jumped almost 10 basis points, and the US dollar hit its highest level since November last year.

Read more: Oil prices head above $80 per barrel as fuel crisis beds in

Stocks in Asia were mixed overnight as rising bond yields stoked fears about inflation and China’s Evergrande Group’s debt crisis intensified.

The property giant said it will be selling its stake in a regional bank at 10bn yuan (£1.15bn, $1.55bn) as a step to resolve its debt crisis. Fitch Ratings downgraded the company from CC to C.

The Nikkei (^N225) slumped more than 2% in Japan, as two candidates took part in a runoff vote for leadership of the ruling party, and the Shanghai Composite (000001.SS) dipped 1.8%. However, the Hang Seng (^HSI) rose 0.6% on the day.

Asian shares are set for their worst quarter since the coronavirus pandemic hit.

Elsewhere, Brent crude oil (BZ=F) retreated slightly from the three-year high it hit on Tuesday.

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