A perkier than anticipated return from the Thanksgiving break on Wall Street helped Europe's main markets end their long run of losses Friday despite an earlier retreat following grim Italian bond auctions.
Futures markets had been indicating declines at the U.S. open. Instead, investors used the opportunity to buy up beaten-down stocks, albeit in thin volumes — many traders usually tag on Friday to their Thanksgiving break too. The Dow Jones industrial average was up 0.2 percent at 11,279, while the broader Standard & Poor's 500 index rose 0.2 percent to 1,164.
They had been trading even higher a little while before and that helped shore up European markets, which have experienced a long run of reverses — Britain's FTSE 100 index of leading British shares for example had just sustained nine straight days of declines, its longest such sequence since early 2003 in the run-up to the U.S.-led invasion of Iraq.
"The recovery comes as something of a surprise, since we remain stuck in the same mire as before," said Chris Beauchamp, market analyst at IG Index.
At the close, the FTSE was up 0.7 percent at 5,164.65 while Germany's DAX rose 1.2 percent to 5,492.87. The CAC-40 in France ended 1.2 percent higher at 2,856.97. Even Italy's stock market ended 0.1 percent higher despite the disappointment of having to pay much higher interest rates in a pair of auctions. The news that its borrowing rates had spiked sharply higher had earlier hit markets in Europe.
They provided yet more evidence of the task facing the country's new technocratic government. Italy's new premier Mario Monti faces a big battle to convince the markets it has a strategy to get a grip on the country's massive debts.
Italy had to pay an average yield of 7.814 percent to raise euro2 billion ($2.67 billion) in two-year bills. That rate was sharply higher on the 4.628 percent it had to pay in the previous auction in October. And even raising euro8 billion ($10.7 billion) for six months proved exorbitantly expensive. The yield for this auction spiked to 6.504 percent, nearly double the 3.535 percent rate in the last equivalent auction last month.
Following the grim news on the auction front, Italy's borrowing rates in the markets skyrocketed, with the ten-year yield spiking to over 7.30 percent — above the 7 percent threshold that is widely considered unsustainable in the long-run and eventually forced Greece, Ireland and Portugal had to seek financial bailouts. It later came off highs to be 0.28 percentage points higher at 7.24 percent.
The renewed rise is likely to renew tensions over Italy's debts, which stand at euro1.9 trillion ($2.6 trillion), or a huge 120 percent of its economic output. Europe's current anti-crisis measures are too not big enough to deal with Italy's debt mountain.
The improved stock market tone allowed the euro to recoup some earlier losses. It was trading 0.3 percent lower only at $1.3285, having earlier dropped to a seven-week low of $1.3211.
Aside from Europe's debt crisis, traders in the U.S. were bracing for a crucial test of the world's No. 1 economy — so-called Black Friday, the day that kicks off the holiday shopping season. How well retailers do will have consequences for the still-fragile U.S. economic recovery, as well as for the global economy.
Earlier in Asia, trading was sluggish. Japan's Nikkei 225 index closed marginally down at 8,160.01 while Hong Kong's Hang Seng dropped 1.4 percent to 17,689.48.
In mainland China, the benchmark Shanghai Composite Index lost 0.7 percent to 2,380.22, its lowest closing level in a month.
Oil prices tracked equities higher — benchmark crude for January delivery was up 18 cents at $96.35 a barrel in electronic trading on the New York Mercantile Exchange.
___
Pamela Sampson in Bangkok contributed to this report.
