European markets rally against global sell-offs

Indices across Europe posted gains on Friday morning as some better-than-expected company results combined with a rallying oil price boosted investor confidence following a week of market tumbles.

The UK's FTSE 100 climbed by as much as 1.6 per cent in early morning trading, reaching 5640 points after losing 2.5 per cent on Thursday and sending the index back to mid-2012 levels.

In Germany, the DAX was up 1.4 per cent to 8,877 points by 11am while France's CAC 40 climbed 1.2 per cent, Spain's IBEX 35 increased 1.3 per cent and Italy's FTSE Italia All Share was up nearly 3 per cent.

The rally coincides with a rising oil price, with the price of a barrel of Brent Crude oil climbing more than 4 per cent to $31.7 on Friday after tumbling to $30 on Thursday.

BETTER-THAN-EXPECTED COMPANY RESULTS

In the UK a number of companies also posted better-than-expected results.

These included Rolls-Royce which, rather than issuing a profit warning and cancelling its dividend as analysts had predicted, maintained its 2016 outlook and only reduced the dividend by 50 per cent. This sent shares soaring by nearly 15 per cent by 11am on Friday.

European financials also enjoyed some respite after suffering steep sell-offs on concerns over the strength of their balance sheets, with better-than-expected results from Germany's Commerzbank sending shares up more than 16 per cent on Friday morning.

Alastair McCaig, market analyst at IG, comments: 'The combination of several catalysts triggered Thursday's aggressive sell-off, resulting in $1.2 trillion (£825 billion) being wiped off global equity markets over the week.

'The headwinds that markets focused on yesterday have not disappeared, but as is the will of the markets, they do like to overdo things.

'The dawn of a new day has seen a little more analysis rather than just blind panic. Much like the indices, equities have seen a few "less bad" data releases that have helped prop up trader optimism.'

ASIA TUMBLES

The positive opening call stands in stark contrast to the performance of Asian markets overnight, with Japan's TOPIX index falling 5.4 per cent by close of trading on Friday (local time), pushing losses to nearly 12 per cent over the week (8 to 12 February).

China's market has been closed this week to mark Chinese New Year.

Commenting on Japanese and European markets, Trevor Greetham, head of multi asset at Royal London Asset Management, says: 'When policy makers start to panic, markets can stop panicking.

'We are seeing the first signs of policy maker panic in Japan with prime minister Abe holding an emergency meeting with Bank of Japan governor Kuroda.

'We are going to get a lot of new stimulus over the next few weeks and not just in Japan. I expect negative interest rates to be used more in Japan and in Europe and I expect this policy to increase bank lending and weaken currencies for the countries that pursue it.'

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