Markets weather Spanish bombings

AFTERSHOCK: Financial markets were still jittery on Friday amid security concerns after the bombings that rocked Madrid, but hopes of economic growth prevailed


Sun, Mar 14, 2004 - Page 10

Financial markets continued on Friday to feel the aftershock of the Spanish train bombs which killed nearly 200 people but investors' gloom showed signs of lifting, buoyed by hopes about economic growth.

European stocks clawed back territory lost during the day to stand flat, while Wall Street looked set to open stronger and the dollar shrugged off security fears to stand higher against major currencies.

Investors' hopes that economic recovery is on its way were boosted by data showing the US current account deficit narrowed unexpectedly in the final three months of 2003, helping European stocks recover from two-month lows.

"Even though we have seen a huge rally [in stocks] over the past year we are still below levels on Sept. 11, 2001 when we were in the middle of a recession," said Roger Hornett, chief executive and global strategist at Gilissen Securities in London.


"The economic backdrop has clearly improved since then. We are seeing huge gains in productivity in the United States and this will eventually turn into a rise in jobs."

The bombings of four packed commuter trains in Madrid killed at least 198 people on Thursday and injured around 1,430 in Europe's bloodiest guerrilla attack for more than 15 years.

Spain has blamed Basque separatist group ETA for the carnage, but a group allied to al-Qaeda has claimed responsibility and said it is planning a major attack on the US.

Equity investors had been cautious before the Madrid bombs, worried about US job growth lagging expectations and the US trade and budget deficits.

The next pointer to the state of the world's largest economy is due today when The University of Michigan publishes its preliminary consumer sentiment index for March.

The FTSE Eurotop 300 index of pan-European blue chips was flat yesterday at 986.80 points, while the narrower DJ Euro Stoxx 50 index had fallen 0.15 percent to 2,829 points.

Earlier Asian shares closed down with Japan's Nikkei 225 down 1.2 percent at 11,162.7. A pan-Asian index of shares outside Japan was down 1.1 percent.

Euro zone government bond yields fell on Friday as investors ploughed into safe haven assets.

"All this uncertainty has boosted the risk premium of assets like Bunds," said a trader in London.

Gains trimmed

The two-year Schatz yield trimmed gains to trade down 1.3 basis points at 2.158 percent. The 10-year Bund yield was down 1.6 basis points at 3.9 percent.

The dollar shrugged off increased security fears. It was trading at US$1.2233 per euro, up 0.7 percent from the US close. It was up 0.4 percent against the yen at 111.30 and up sharply against the British pound, the Swiss franc and the Australian dollar.

Crude oil futures rose 14 cents to US$32.97 on security worries but safe-haven gold was down at US$397.80/US$398.50 against its New York close at US$402.25/$403.