Stocks inch up as U.S. holiday thins trade

By Jeremy Gaunt, European Investment Correspondent

LONDON (BestGrowthStock) – Financial markets regained some composure on Thursday after roller-coaster sessions prompted by the euro zone’s debt problems as recent upbeat economic data encouraged investors to put on some risk.

Risk appetite improved slightly on the back of solid overnight gains on Wall Street, but there would be no follow though from that quarter as U.S. markets were closed for the Thanksgiving holiday.

World stocks as measured by MSCI (.MIWD00000PUS: ) were up slightly, with Europe and Japan higher.

“The most important thing for the equity market is the ability to believe that the economic cycle is staying intact,” Philip Isherwood, European equities strategist at Evolution Securities, said. “That means not just U.S. data reassuring, but also European.”

German government bonds fell, pressured by the financial implications for core issuers of potential further euro zone bailouts and by recent data highlighting the strength of the region’s largest economy.

“The next step could be that core Europe will take significantly more responsibility for the rest of Europe,” RBC rate strategist Peter Schaffrik said.

Investors have also begun considering whether German plans to include Collective Action Clauses (CACs) in euro zone sovereign debt issues will require more risk priced in generally for such bonds.

Yield spreads on Spanish and Portuguese bonds — watched for signs they will be the next dominoes to topple in Europe’s crisis — widened by 10 basis points over German Bunds.

In currency markets, the dollar briefly hit a two-month high against a basket of major currencies (.DXY: ) before reversing gains. The euro was up 0.3 percent at $1.3367.

“Things are a bit sidelined due to the U.S. holiday but there is still a lot of nervousness about euro zone peripheral debt problems. So the euro remains a sell into rallies and not a buy on dips,” said Paul Mackel, HSBC’s director of currency strategy.

MIXED STOCKS

World stock markets were generally steady because of the U.S. hiatus with MSCI’s all country world index up 0.1 percent and its emerging market counterpart gaining a quarter percent.

Europe’s FTSEurofirst 300 (.FTEU3: ) rose about 0.6 percent. Japan’s Nikkei (.N225: ) closed up 0.5 percent.

Koen De Leus, strategist at KBC Securities, said the European market was getting some support from recent strong economic data, including on consumer spending, joblessness and consumer confidence.

French consumer confidence was the latest sentiment indicator to beat forecasts in Europe on Thursday, following a strong reading from Germany’s closely watched Ifo survey a day earlier.

“Markets are on a rollercoaster. Despair on the ride down due to the day-by-day increasing debt contagion in Europe is occasionally relieved by better-than-expected macro data from Europe and the U.S. It’s a delicate balance,” De Leus said.

(Additional reporting by Joanne Frearson and Kirsten Donovan, editing by Mike Peacock)

Stocks inch up as U.S. holiday thins trade