ROME: European stocks staged a rebound Tuesday as bargain hunters emerged a day after the market suffered its worst selloff in nearly seven years, with Germany’s benchmark even turning positive for the week.
The Stoxx Europe 600 SXXP, +4.20% gained 4.2% to close at 356.29, as it built on earlier gains after China’s central bank, during late-morning European trade, said it would cut its benchmark-interest rates, and that the reserve requirement ratio for banks is being lowered by 0.5 percentage point. The moves will go into effect Wednesday.
The pan-European benchmark recouped most of its loss from the prior session. It sank 5.3% on Monday for its biggest percentage loss since December 2008 as part of a global rout in equities sparked by worries that China’s economy is slowing down more than anticipated. Analysts fanned out Tuesday to calm investors.
“The drop in commodity prices during the past year and recent economic and FX weakness in China and other emerging markets will not tip the global economy into recession, in our view,” said Goldman Sachs analysts in a research note Tuesday, adding that they remain underweight in commodities.
“We recognize that the distribution of near-term market risk has shifted,” added Goldman as it lowered its three-month view on European equities to neutral from overweight, and raised U.S. equities to neutral from underweight.
