European stock markets rose modestly today following late day-before gains on Wall Street — but the fifth straight retreat on Japan's main Nikkei index provided ample evidence that investor sentiment remains extremely fragile.
In Europe, the FTSE 100 index of leading British shares was up 17.66 points, or 0.4 percent, at 4,212.57 while Germany's rose 9.35 points, or 0.2 percent, at 4,661.17. The CAC-40 in France was 8.89 points, or 0.3 percent, higher at 3,091.05.
The gains in Europe came despite further losses in Asia where stocks were weighed down by waning investor optimism about the global economic recovery ahead of this week's meeting of the Group of Eight leaders in Italy.
The Nikkei 225 stock average fell 33.08 points, or 0.3 percent, at 9,647.79 while Hong Kong's Hang Seng shed 117.14, or 0.7 percent, to 17,862.27.
"The Japanese equity market is down for its fifth straight session as worries about the prospects for the global economy dent investor sentiment...the same applies to the other major markets where there is a reappraisal about where the economy is going following the optimism seen in the second quarter" said Neil Mackinnon, chief economist at ECU Group.
"Now, things look a little less certain and recent economic data suggests that the foundations for a durable economic recovery are not so strong," he added.
Equities rose from the middle of March until the start of June on hopes that the U.S. economy in particular will recover from
recession sooner than anticipated. Many investors saw stock valuations as particularly cheap and started buying. The S&P 500 index in the U.S. rose around 16 percent during the second quarter, its best performance since 1998, amid hopes of a global recovery despite worries about the banking system, public finances and the length and depth of the
recession.
But disappointing economic news over the last few weeks, culminating in last Thursday's worse than expected U.S. jobs report for June, has altered the general mood prevailing among investors that a significant rebound in the U.S. was a distinct possibility. A sharp rebound in U.S. economic activity will not emerge until unemployment stops rising.
Oil prices continued to fall amid the global economic uncertainty, with benchmark crude for August delivery down 8 cents at $63.97 a barrel. On Monday, the benchmark contract slid $2.68 to settle at $64.05.
The start of the second-quarter earnings reporting season will provide some clues as to whether companies have already seen the worst of the
recession. U.S. aluminum giant Alcoa Inc. opens earnings season on Wednesday.
"Tomorrow sees the start of the quarterly earnings season from across the Atlantic so this is the sort of news that may help steer opinion," said Matt Buckland, a dealer at CMC Markets.
Trading on Wall Street was expected to be relatively subdued at the open. Dow futures were up 19 points, or 0.2 percent, at 8,258 while the broader Standard & Poor's 500 futures rose 1.8 point, or 0.2 percent, to 893.70.
Elsewhere in Asia, South Korea's Kospi rose 0.4 percent to 1,434.20, while China's Shanghai fell 1.1 percent. Australia's market retreated 0.4 percent but Singapore trimmed gains to be almost flat.
The dollar was steady at 95.17 yen while the euro was flat at $1.3968.
Mitul Kotecha, head of global currency strategy, said foreign exchange markets will continue to be dictated by movements in equities but that "the lack of clear direction on this front suggests little appetite to break out of current ranges."
