European shares rise as Tokyo hits two-month low

2/08/2010 03:18:00 PM

LONDON – European stocks staged a fragile rebound on Monday after sharp falls last week caused by mounting debt fears in Europe, but Tokyo hit the lowest point in nearly two months as most Asian indices fell.

Approaching midday in London, the benchmark FTSE 100 index was up 0.11 percent to 5,066.37 points as it failed to hold on to a robust gain of almost one percent in early morning trade.

Last week the FTSE slumped by almost 2.5 percent on growing concerns that debt-ridden countries Greece, Spain and Portugal may be unable to stabilise their public finances, having spent heavily to combat recession.

"The economic woes in Europe are dominating headlines," ODL Securities analyst Owen Ireland said on Monday, adding that there were two schools of thought regarding the issue.

"The pessimistic view is that by bailing out Greece, we risk going back to the 'too big to fail' , thus setting us back on the road to doom.

"The optimists point to how the issues in Dubai were quickly smoothed over and how it was only a blip in the recent long term recovery."

Concerns over Europe's debt woes continued to weigh on most Asian markets on Monday while weaker-than-expected US jobs data also led to fears over the pace of recovery in the world's biggest economy, traders said.

The euro was off last week's eight-month lows but was still being sold in favour of the dollar as the European problems continue to hit sentiment.

"The market's biggest concern is the European fiscal situation and this problem won't be solved any time soon," Nikko Cordial senior strategist Tsuyoshi Kawata told Dow Jones Newswires.

Dealers in Asia were unimpressed by remarks from eurozone finance officials at Group of Seven weekend talks in Canada on Greece's efforts cut its public debt.

French Economy Minister Christine Lagarde said: "The European members of the G7 have confirmed to the other partners of the G7 the substance and the significance of the plan put together by Greece and that they are confident that it will be managed."

But that was not enough to soothe concerns on Asian markets.

Tokyo's Nikkei closed down 1.05 percent to 9,951.82 points -- the first time it had been below 10,000 since December 10.

Toyota extended its recent losses as it reels from a series of safety issues. The car maker dropped 1.05 percent to 3,280 yen, having plunged from above 4,000 yen in just a few weeks.

Elsewhere in Asia, Hong Kong shed 0.58 percent while Sydney climbed 0.16 percent.

In Europe, Frankfurt's DAX 30 gained 0.39 percent to 5,454.90 points and the Paris CAC 40 was up 0.29 percent to 3,573.94.

"There is a sense of deja vu with the present hysteria about Greece and euro sustainability in general," Irish stockbrokers Davy said in a note to clients on Monday.

"Ireland felt it exactly one year ago. Worries about fiscal sustainability will take longer to pass in Greece compared with Ireland for example ... but the wider impact on risk markets is probably now overblown."

Wall Street clawed into positive territory Friday in a late snapback after the much-awaited US jobs report for January presented a muddled picture on the troubled labor sector.

The Dow Jones Industrial Average rose 0.10 percent to 10,012.23, erasing an intraday loss of more than 160 points.