Global markets surge as crude prices retreat

Stock markets from Britain to China rose yesterday as cautious investors hunted for bargains after recent steep declines, while oil prices retreated from last week's record high.

Investors were keeping an eye on the three-day meeting of leaders of the Group of Eight countries to see if they send a message strong enough to reverse the course of record high oil prices and the dollar's long-term slide.

Mounting expectations the European Central Bank will not follow up with another interest rate rise after last week's well-flagged 25 basis point move to 4.25 percent also undermined the euro, which fell to a one-week low versus the dollar.

"Fundamentally the deteriorating economic outlook still makes for a difficult environment for equities short term, but clearly there is enough valuation support [for] a short term-rally," said Darren Winder, head of macro and strategy research at Cazenove in London.

The FTSEurofirst 300 index of top European shares rose 0.5 per cent in morning trade, with Germany's DAX gaining 0.9 per cent and London's FTSE climbing 0.4 per cent. The FTSEurofirst 300 index is still down more than 20 per cent this year.

Asian stocks rose yesterday, snapping a six-day losing streak on optimism China's banking sector has thrived despite market turmoil and bargain-hunting investors picked over battered shares.

However, fears that stagflation would hit earnings and continue to depress consumer spending kept enthusiasm under wraps as European, Asian and US equity markets all lingered in bear market territory.

European stocks were expected to open modestly higher thanks to a dip in oil prices, according to financial bookmakers in London. Worries about the European banking sector could limit gains after a Swiss newspaper reported on Sunday authorities could require UBS and Credit Suisse to set aside an additional 70 billion Swiss francs (Dh250.6bn) in capital.

"Investors shouldn't feel too gloomy about the stock market since most shares have become cheaper after recent losses," said Michael On, managing director of Beyond Asset Management in Taipei.

The Shanghai composite jumped 4.2 per cent on hopes the index had found a near-term floor, bouncing from a 17-month low plumbed last week.

Hong Kong's Hang Seng index gained 1.5 per cent, helped by banks such as China Merchants Bank, which forecast on Friday its first-half net profit more than doubled, following a positive earnings comment from Industrial and Commercial Bank of China on Thursday.

Japan's Nikkei share average finished 0.9 per cent higher, breaking the longest losing streak since 1954. The biggest percentage gainers on the index yesterday had underperformed the Nikkei by up to four percentage points last month.