World stocks up on another Shanghai advance
LONDON -- European stock markets and Wall Street futures rose Friday after another advance in China and ahead of key comments from U.S. Federal Reserve chairman Ben Bernanke.
The FTSE 100 index of leading British shares was up 53.28 points, or 1.1 percent, at 4,809.86, while Germany's DAX rose 90.45 points, or 1.7 percent, to 5,401.51. The CAC-40 in France was 51.24 points, or 1.5 percent, higher at 3,556.56.
Earlier in Asia, Japan's Nikkei 225 stock average fell 145.21 points, or 1.4 percent, to 10,238.20 and Hong Kong's Hang Seng dropped 129.84, or 0.6 percent, to 20,199.02.
However, China's Shanghai Composite index rose for a second day -- gaining 1.7 percent to 2,960.77 -- after rattling investors worldwide when it tumbled earlier this week.
Many analysts consider the Chinese market a lead indicator for worldwide, particularly European, stocks -- over the last couple of years, Chinese stocks have led where others have followed. Sharp falls in the summer of 2007 proved to be a precursor to the start of the seizing up in credit markets, the prime cause of the global recession.
This week, that relationship has seemingly become even more entrenched, particularly on Wednesday, when big declines in Shanghai prompted a fall in Europe before stronger trading on Wall Street soothed frayed nerves.
Stephen Lewis, an analyst at Monument Securities, said financial markets appear to be "in thrall" with what's going on in Asia, and European equities, specifically, are rising and falling with the ups and downs of the Shanghai stock indices.
"So much of the markets' optimism with regard to global economic recovery is bound up with growth in China that it is not entirely irrational for European investors to attach substantial weight to the gyrations in Shanghai equity prices," he said.
However, analysts know that in the long-run, the direction equities take will largely depend on what happens on Wall Street, and further insights will likely emerge when trading traditionally picks up after the Labor Day holiday in early September.
As has been the case in recent days, trading volumes remained relatively light -- and one effect of low volumes is that volatility tends to be higher, meaning any news developments could quickly get indexes moving. The most likely event on the calendar to shake up trading will be Bernanke's address at an annual Fed conference in Jackson Hole, Wyoming. In particular, investors will be interested to hear anything he may say on how the Fed plans to withdraw its monetary stimulus when the time comes.
"With the U.S. economy showing signs of sitting up and taking nourishment, observers wonder whether the Fed chairman will discuss any exit strategy from quantitative easing," said David Buik, markets analyst at BGC Partners.
Prospects for Wall Street's open appeared bright. Dow futures were up 45 points, or 0.5 percent, at 9,365 while the broader Standard & Poor's 500 futures rose 5.8 points, or 0.6 percent, to 1,010.50. Wall Street posted modest gains Thursday as news of an improvement in regional manufacturing and an uptick in a gauge of leading economic indicators offset an unexpected rise in new claims for unemployment benefits.
Elsewhere in Asia, Australia's index retreated 2 percent after a government fund sold a big chunk of shares in the country's top telecommunications company Telstra. South Korea's Kospi rose 0.3 percent while India's Sensex was up 0.4 percent.
Oil prices pushed back above $73 a barrel amid the improving equities backdrop. Benchmark crude for October delivery was up 82 cents to $73.73 a barrel in electronic trading on the New York Mercantile Exchange.
In currencies, the dollar fell 0.4 percent to 93.785 yen while the euro rose 0.6 percent to $1.4337.