Asian stocks are displayed outside a brokerage in Tokyo on Friday.Credit Yuya Shino/Reuters
PARIS — Updated, 2:30 p.m. | A
market sell-off that has left investors gasping for breath eased
Friday, calmed by soothing words from central bank officials on both
sides of the Atlantic.
Shares largely
recovered in Europe and were trading higher on Wall Street as well.
Investors seemed to have stepped back from the whirlwind of recent days
to reassess whether stocks had been oversold.
“We do not think the
current market sell-off is justified by fundamentals,” Reinhard Cluse,
an economist at UBS in London, wrote in a research note.
The Euro Stoxx 50
index, a barometer of eurozone blue chips, closed 3 percent higher in
trading, while the FTSE 100 index in London rose 1.9 percent.
The momentum in Europe
and positive earnings reports by American companies helped to push
Wall Street higher. The Standard & Poor’s 500-stock index had gained
0.9 percent by early afternoon in New York, while the Dow Jones
industrial average had risen 1.3 percent.
One of the big movers
was General Electric, which gained 3.4 percent. The giant industrial
and financial conglomerate reported third-quarter net income of $3.54
billion, or 10.8 percent, and said orders for industrial products and
services rose 22 percent.
Stocks Ending the Week on an Upswing
Encouraged by some
strong corporate earnings reports and a pickup in home construction,
Wall Street was higher in afternoon trading.
As a sign of the
relative calm, yields of the safest government bonds, including those of
the United States and Germany, rose as their prices, which move in the
opposite direction, fell. Conversely, the bonds of countries that had
come under pressure in recent days – Italy, Portugal, Spain and, above
all, Greece – recovered, sending their yields down.
Greece’s 10-year
bonds, which had surged as high as 8.6 percent on Thursday, retreated to
7.8 percent on Friday. The yield on Portugal’s bonds, which had also
been under pressure, fell back to around 3.3 percent.
Recent signs of
weakness in Europe appear to be temporary, Mr. Cluse wrote, and ‘‘the
growth trajectory in the U.S. remains intact.’’
United States crude
oil rose 46 cents to $83.14 a barrel. Oil prices have dropped about 20
percent since this summer, reflecting the cooling pace of economic
growth around the world.
Shares of automakers
and auto parts companies were among the biggest gainers in Europe after a
report showed the car market in the European Union continued to expand
in September. New registrations of passenger cars, a proxy for sales,
rose 6.4 percent from September 2013, the European Automobile
Manufacturers’ Association reported from Brussels.
While the latest figures signaled a 13th consecutive month of increase
and helped to ease fears that the market might be stalling, analysts do
not expect sales in Europe to reach precrisis levels before the next
decade.
Volkswagen gained 4.8 percent, Renault rose almost 4 percent, and PSA Peugeot Citroën was up nearly 7 percent.
Six years after the
collapse of Lehman Brothers and the beginning of the economic crisis,
global financial institutions remain dependent on the zero interest-rate
policies of major central banks.
Recent signs that the
monetary authorities might be moving toward raising banks’ funding costs
have sent tremors through markets. That has coupled with increasing
worries about Europe, the apparent sick man of the world economy, which
is struggling ineffectually to tackle persistently low inflation and
ward off deflation.
Benoît Cœuré, a member
of the European Central Bank’s governing council, said on Friday that
the central bank was ready to begin taking more aggressive monetary
stimulus measures if conditions warranted.
Mr. Cœuré was quoted by Reuters as telling reporters in Riga, Latvia, that the central bank was “ready to take additional nonconventional measures, if needed.”
“We will start within
the next days to purchase the assets that are foreseen under our new
purchase programs,” he added, “with the objective to steer the balance
sheet of the E.C.B. to a higher level.”
Andrew G. Haldane,
chief economist at the Bank of England, encouraged the view that markets
might be premature in anticipating higher interest rates in Britain.
‘‘But if the last
three months tell us anything,’’ he added, ‘‘it’s that the data can
change a lot.’’ When the data changes, officials on the bank’s Monetary
Policy Committee ‘‘change our minds, too,’’ he said.
The E.C.B. took
concrete steps Friday to begin purchases of private sector assets, a
mild form of the quantitative easing used by the Federal Reserve in the
United States and the Bank of England to encourage recovery in their
respective economies.
The E.C.B. had
announced the purchase program on Oct. 2 and said it would begin in the
second half of the month. But markets seemed to be reassured by signs
the purchases are imminent.
In one such sign, the
E.C.B. published a legal act Friday that will allow it to buy covered
bonds, a form of debt issued by banks that is backed by loans they have
issued. In another indication that the purchases are imminent, the
E.C.B. also said Friday it would provide weekly updates on the size of
its bond-buying, beginning Tuesday.
Because the supply of
private sector assets is limited, analysts say the E.C.B. will
eventually need to buy large quantities of government bonds as a way of
pumping money into the eurozone economy. The purchase of private sector
assets is seen as a preliminary step toward full-scale quantitative
easing that would include government bonds.
On Friday, Asian
shares were mixed. The Nikkei 225 index closed 1.4 percent lower in
Tokyo, the S.&P./ASX 200 index rose 0.3 percent in Sydney,
Australia, and the Hang Seng index added 0.5 percent in Hong Kong.
The dollar was mixed
against most other major currencies as investors became more willing to
take on risk. The euro was trading at $1.2777, down 0.3 percent from the
close on Thursday, and the dollar gained about 0.4 percent to 106.75
yen.
Jack Ewing contributed reporting from Frankfurt.
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