World markets rebound

Photo: The Canadian Press

Global shares were mixed Wednesday in a fitful rebound from the rout suffered earlier in the week.

France's CAC 40 rose 0.5 per cent to 5,187.38 in early trading, while Germany's DAX added 0.6 per cent to 12,470.39. Britain's FTSE 100 surged 0.8 per cent to 7,200.85. But U.S. shares were set to drift lower with Dow futures down 1.1 per cent at 24,527. S&P 500 futures also dropped 1.1 per cent, to 2,665.70.

Japan's benchmark Nikkei 225 index surged as soon as trading began, but gave up its initial gains as the yen strengthened against the dollar. It ended the day up only 0.2 per cent at 21,645.37. The benchmark had tumbled as much as 7.1 per cent on Tuesday before regaining some lost ground to close 4.7 per cent lower.

In South Korea the Kospi, which saw only modest losses on Tuesday, fell back to close 2.3 per cent lower at 2,396.53 as investors fretted over whether the U.S. Federal Reserve will tighten monetary policy.

"It means that there are more investors with a negative view on the market in the long term," said Oh Hyun-seok, a market analyst at Samsung Securities. "South Korean markets started higher in the morning but investors are more worried that U.S. markets will see further sell-offs tonight."

Also Wednesday, Australia's S&P/ASX 200 gained nearly 0.8 per cent to 5,876.80. Hong Kong's Hang Seng slipped 0.9 per cent to 30,323.20, while the Shanghai Composite lost 1.8 per cent to 3,309.26 on heavy selling of banks and insurers.

It's unclear if the global markets are really moving in "lockstep," as some observers have suggested, but uncertainty abounds.

"While today would be crucial in seeing if the bulls can wrestle back control for Asian markets, it does appear that we have finally entered a period of increased volatility," says Jingyi Pan, market strategist at IG in Singapore.

"This increased volatility had been one that the market was anticipating at the start of the year, but certainly took its time to arrive and may retain a spot in the market after this week's tumultuous turn."

The large share of foreign trading activity in Japan and some other regional markets raised the likelihood that losses seen in the U.S. may spill over into other regions. That's less true for China, whose financial markets are more cloistered from international investors.

U.S. markets started lower after major indexes in Asia and Europe sank Tuesday, but a late surge helped them regain almost half the losses from their biggest plunge in 6 1/2 years the day before.

The Dow Jones industrial average lost 567 points right after trading began but eventually gained 567 points, adding 2.3 per cent to 24,912.77.

The Standard & Poor's 500 index, a broader market barometer tracked by many index funds, climbed 1.7 per cent to 2,695.14. The Nasdaq composite rose 2.1 per cent to 7,115.88.

Steep declines on Friday and Monday wiped out the gains the Dow and S&P 500 had made since the beginning of the year. But the Dow is up 24 per cent in the past 12 months and the S&P 500 has gained 18 per cent.

After Tuesday's rebound the S&P 500 is still down 6.2 per cent from the record high it set on January 26. That's less than the 10 per cent seen as a correction. Corrections are seen as entirely normal and even helpful in curbing excessive gains during bull markets. The last market correction ended almost two years ago.

Investors remain fearful that signs of rising inflation and higher interest rates could stifle the bull market that has pushed stocks to record high after record high in recent years.