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European markets rally but Wall Street struggles continue

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·4-min read
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European stock markets tracked a strong bounce in Asia as Wall Street swings in the red. Photo: Thomas Lohnes/DDP/AFP via Getty
European stock markets tracked a strong bounce in Asia as Wall Street swings in the red. Photo: Thomas Lohnes/DDP/AFP via Getty

European markets rebounded on Friday as stocks in the UK, France and Germany tracked a strong bounce in Asia following sharp declines during the previous sessions as Wall Street volatility continues.

The FTSE 100 (^FTSE) rose 1.2% after Wednesday and Thursday’s rout wiped more than £51bn ($63.6bn) off the benchmark index. The domestically-focused FTSE 250 (^FTMC) rose 0.7%.

France’s CAC (^FCHI) was 0.2% higher on the day and the DAX (^GDAXI) shot up 0.5% in Frankfurt.

Royal Mail (RMG.L), which was the biggest faller on London's bluechip index on Thursday. was the top performer on Friday, up 5%, followed closely by ITV (ITV.L) and Prudential (PRU.L), up 4.3% and 3.8% respectively.

Shares in online retail group THG (THG.L) jumped as much as 27% after it rejected a takeover bid and property tycoon Nick Candy expressed an interest. Advertising firm M&C Saatchi (SAA.L) surged 34% after bosses agreed a £310m takeover by Next Fifteen Communications.

It came as retail sales unexpectedly jumped by 1.4% in April from a 1.2% drop the month before, beating economist forecasts of a 0.2% decline. This was despite inflation soaring 9% during the month. The recovery was driven by a 2.8% surge in food store sales volumes, according to the Office for National Statistics.

Read more: UK retail sales rise in April despite inflation squeeze

Separately, consumer confidence dipped to the lowest level since records began in 1974 amid growing concern over the cost of living crisis.

The latest snapshot from GfK shows UK consumers are now gloomier about their personal finance and economic outlook than they were during the financial crisis in 2008 amid fears Britain is headed for a recession. The consumer confidence number fell to a record low of -40 in May.

"Mixed economic messages are adding to the volatility but detracting from the performance of markets, as investors continue to seek refuge from waning prices," said Richard Hunter, head of markets at Interactive Investor.

Sterling (GBPUSD=X) lost ground against the dollar after a lift following the surprise lift in retail sales, dipping 0.1% to $1,245, it was down 0.1% to 84p against the euro (EURGBP=X).

Across the pond, US indices gave up early gains as volatility continues after investor sentiment was briefly boosted by the Chinese central bank slashing a key interest rate that lifted Asian markets.

"It has been another see-saw week in markets, as a rally in the first part of the week turned to dust in the second, but China’s rate cut has provided the rationale for a bounce in global stocks to round off the week," said Chris Beauchamp, chief market analyst at online trading platform IG.

The benchmark S&P 500 (^GSPC) lost 40.31 points, or 1%, to 3860.48 after nearing bear market territory the day before. The Dow Jones (^DJI) retreated 0.9%, while the tech-heavy Nasdaq (^IXIC) fell 1.3% at London's close.

Markets were spooked earlier this week by gloomy forecasts from major retailers like Target (TGT), Walmart (WMT) and Khol’s (KKS), with all three indexes on track for weekly losses as the sell-off that saw Wall Street tumble 4% on Wednesday continued on Thursday.

The S&P 500 and the Nasdaq are tracking their seventh straight week of losses, their longest losing streak since 2001, while the Dow is set for its eight-weekly decline in a row, its longest since 1932.

Michael Hewson, chief market analyst at CMC Markets, said: "Yesterday’s [Thursday] price action saw a sea of red for markets in Europe with the most pain being felt by the retail sector after this week’s profit warnings from US retail giants Walmart, Target and Kohl’s.

Read more: UK consumer confidence plunges to lowest since 1974

"At the end of another choppy week for European markets sentiment appears to have become much more fragile, with the moves being seen in bond yields reflecting concern that we are heading for a growth slowdown."

Asian stocks were in the green overnight after China cut its 5-year loan prime rate by 15 basis points, for the second time this year.

In Tokyo, the Nikkei (^N225) was up 1.3%, the Hang Seng (^HSI) jumped 3%% in Hong Kong and the Shanghai Composite (000001.SS) gained 1.6% on close.

Watch: How does inflation affect interest rates?

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