Investors on edge as fears remain over credit

LONDON – Fears about a global credit crunch kept investors on edge yesterday, providing for see-sawing stock markets and a low appetite for riskier assets such as emerging market debt.

Wall Street looked set to open higher, lifting European stocks into positive territory after a morning of losses. Asian shares earlier gained solidly.A surprise hike in interest rates from China added to the mix, extending gains among euro zone bonds and US Treasuries and paring gains in the Japanese yen.Despite near-euphoric stock trading immediately after Friday’s move by the US Federal Reserve to shore up confidence with a cut in the rate it lends money to banks, investors remain highly cautious and markets volatile.Many appear to be waiting for more action from the Fed.”We are still in a situation where we can expect some volatile days,” said Richard Hunter, head of UK equities at Hargreaves Lansdown.”On the one hand confidence is going to take a little while to return and on the other hand before such time as the extent of the credit problems are known it’s going to be very difficult to move on in any meaningful way.”On Monday, for example, safe-haven plays pushed money into three-month US Treasury bills at such a rate it triggered the biggest one-day fall in yields since the October 1987 stock market crash.The finance chiefs of the world’s two biggest economies – the United States and Japan – pledged to keep a close watch on jittery markets, while banks at the sharp end of a global financial storm said they faced serious trouble.The chief executive of Germany’s WestLB bank, Alexander Stuhlmann, for example, said turmoil in the US subprime mortgage market was making it difficult for German banks to get credit lines from their foreign partners.The pan-European FTSEurofirst 300 index spent the morning session with losses but then rebounded to gain 0,4 per cent.Britain’s FTSE 100 was up 0,3 per cent, Germany’s DAX 0,7 per cent and France’s CAC 0,7 per cent.Japan’s Nikkei share average earlier rose 1.1 percent, gaining 168,86 points to close at 15 901,34.The broader TOPIX index climbed 1,73 per cent to finish yesterday at 1 549,88.The yen was higher against the dollar as investors unwound so-called carry trades in which they have sold yen for higher-returning currencies.But it lost some of its earlier gains after the Chinese rate move.The US dollar was down 0,2 per cent at 114,71 yen but the euro gained about the same to 155,05 yen.The euro was up about a third of a per cent at US$1,3515.Euro zone government bond yields fell, extending the previous session’s falls as continuing investor anxiety about a global credit squeeze supported demand.Nampa-ReutersAsian shares earlier gained solidly.A surprise hike in interest rates from China added to the mix, extending gains among euro zone bonds and US Treasuries and paring gains in the Japanese yen.Despite near-euphoric stock trading immediately after Friday’s move by the US Federal Reserve to shore up confidence with a cut in the rate it lends money to banks, investors remain highly cautious and markets volatile.Many appear to be waiting for more action from the Fed.”We are still in a situation where we can expect some volatile days,” said Richard Hunter, head of UK equities at Hargreaves Lansdown.”On the one hand confidence is going to take a little while to return and on the other hand before such time as the extent of the credit problems are known it’s going to be very difficult to move on in any meaningful way.”On Monday, for example, safe-haven plays pushed money into three-month US Treasury bills at such a rate it triggered the biggest one-day fall in yields since the October 1987 stock market crash.The finance chiefs of the world’s two biggest economies – the United States and Japan – pledged to keep a close watch on jittery markets, while banks at the sharp end of a global financial storm said they faced serious trouble.The chief executive of Germany’s WestLB bank, Alexander Stuhlmann, for example, said turmoil in the US subprime mortgage market was making it difficult for German banks to get credit lines from their foreign partners.The pan-European FTSEurofirst 300 index spent the morning session with losses but then rebounded to gain 0,4 per cent.Britain’s FTSE 100 was up 0,3 per cent, Germany’s DAX 0,7 per cent and France’s CAC 0,7 per cent.Japan’s Nikkei share average earlier rose 1.1 percent, gaining 168,86 points to close at 15 901,34.The broader TOPIX index climbed 1,73 per cent to finish yesterday at 1 549,88.The yen was higher against the dollar as investors unwound so-called carry trades in which they have sold yen for higher-returning currencies.But it lost some of its earlier gains after the Chinese rate move.The US dollar was down 0,2 per cent at 114,71 yen but the euro gained about the same to 155,05 yen.The euro was up about a third of a per cent at US$1,3515.Euro zone government bond yields fell, extending the previous session’s falls as continuing investor anxiety about a global credit squeeze supported demand.Nampa-Reuters