European markets higher on expected Dow bounce

• By PAN PYLAS
• AP Business Writer
• Published: Dec 2, 2008 - UPDATED: 9:17 a.m.

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LONDON (AP) -- European stocks rose modestly Tuesday as hopes of a rebound on Wall Street - following the previous day's savage retreat - helped offset an overnight slump in Asian markets.

The FTSE 100 index of leading British shares was up 32.76 points, or 0.8 percent, at 4,098.25, helped by a 12 percent rise in the share price of British Airways PLC, which said it is in merger talks with Australian rival Qantas.

Meanwhile, the CAC-40 index in France was 25.11 points, or 0.8 percent, higher at 3,105.54. Germany's DAX was the best performing European index, up 74.09 points, or 1.7 percent, at 4,468.88, as car companies like Daimler AG and Volkswagen AG recouped most of the previous session's losses.

Earlier, Asian markets slid with Japan's Nikkei 225 stock average tumbled 533.53 points, or 6.4 percent, to 7,863.69, and Hong Kong's Hang Seng index lost5 percent to 13,405.85.

The heavy losses in Asia followed near 5 percent declines in Europe on Monday and the near 700 point, or 7.7 percent, slide in the Dow Jones index of leading U.S. shares, which wiped out more than half of last week's gains.

However, Wall Street was expected to open higher following a now-familiar pattern of snapping back after a huge selloff. Dow Jones industrial average futures rose 130, or 1.6 percent, to 8,269, while Standard & Poor's 500 index futures rose 15.10, or 1.9 percent, to 830.90,

European and U.S. markets sold off heavily Monday, followed Tuesday in Asia, after a run of bad data across the world, increasing fears that the length and depth of the global economic downturn will be bigger than anticipated.

It all culminated with Monday's announcement by the National Bureau of Economic Research, considered the arbiter of the U.S. economic cycle, that the world's largest economy entered a recession in December 2007, much earlier than most predictions.

"If the U.S. economy is entering a depression, it is far too soon, even for an equity market that tries to discount conditions six months or a year ahead, to be looking for economic recovery," said Stephen Lewis, chief economist at Monument Securities.

The optimism which saw U.S. stocks rise for five straight days last week for the first time since July 2007, has all but evaporated amid renewed worries about the global economy. The data expected out of the U.S. over the rest of the week, culminating in Friday's closely-watched jobs report for November, is expected to make for further grim reading.

Despite the recession which has taken hold across the developed world, some companies are managing to post solid performances. One notable example was British supermarkets chain Tesco PLC Tuesday, which saw its share price rise around 9 percent after it reported like-for-like sales excluding revenues from its gas pumps up 2 percent during the third quarter; including gas the total was up 3.2 percent.

"Yet again Tesco has defied the laws of gravity kicking market recession fears firmly in the teeth," said Howard Wheeldon, senior strategist at BGC Partners.

Tesco will be hoping that the widely-anticipated 1 percentage point rate reduction Thursday from the Bank of England will help entice shoppers in the crucial Christmas trading period ahead. The European Central Bank is also expected to cut its benchmark rate by at least half a percentage point on Thursday.