At the beginning of today’s trading on European exchanges, leading indices have significantly risen, thanks to the recovery of the financial sector after the Fed announced a bailout for AIG. The FTSEurofirst 300 index of leading European stocks jumped 1.7 percent this morning, to 1,109 points.
The Paris CAC index is up more than 1 percent, while the Frankfurt DAX index is up about 0.5 percent. However, after the initial rise, the London FTSE index is currently down about 0.6 percent. The focus of investors is on the financial sector, thanks to the news that the U.S. central bank will grant American International Group an extraordinary loan of $85 billion, which will prevent the collapse of one of the world’s largest insurance companies.
This has spurred a strong rise in stock prices in the European financial sector this morning. Shares of Swiss UBS rose by 11 percent, and those of French Societe Generale by 5.7 percent. The share price of British Barclays also rose significantly, by about 10 percent, after it agreed yesterday to purchase several business divisions of Lehman Brothers, the American investment bank that filed for bankruptcy on Monday.
“The financial sector should strengthen today, given that the Fed decided last night to rescue AIG. It seems to be a better deal than expected,” says Bernard McAliden, a strategist at NCB Stockbrokers. The prices of mining company stocks have also risen significantly after yesterday’s sharp decline. Shares of Rio Tinto rose by 4.5 percent, and Xtrate by 2.5 percent. On the Tokyo Stock Exchange, the Nikkei index rose by 1.2 percent today, to 11,749 points. Immediately after the news of the AIG bailout, the index jumped by 2.3 percent. (H)
