On Thursday, the three-day consecutive decline in the value of stock indices on European markets was halted, primarily due to the purchase of distressed financial and commodity stocks, encouraged by the coordinated actions of central banks to reduce interest rates and the partial nationalization of British banks.
In such circumstances, the London FTSE index strengthened by nearly 1.2 percent, reaching 4,417 points. The Frankfurt DAX index recorded an even greater percentage gain of 1.9 percent, reaching 5,109 points. On Wednesday, the index of the 300 leading European stocks plummeted to its lowest level since December 2003 as investors became concerned about economic growth, despite the coordinated interest rate cuts by leading global central banks. The recovery on Thursday was influenced by increased purchases of bank stocks, with shares of the Royal Bank of Scotland jumping 14 percent and HBOS by 29 percent.
Dexia recorded a 24 percent jump in its stock price after France, Belgium, and Luxembourg agreed to provide guarantees for the loan that this distressed bank will take on the market. This is the latest in a series of similar moves made by governments around the world to stabilize the crisis-hit financial sector, which includes bailout packages in the US and the UK, as well as the rescue of Fortis in Belgium. “Today we are witnessing some kind of stabilization, which is somewhat like a technical correction after recent heavy losses,” said Tammo Greetfeld, an analyst at UniCredit in Munich.
