European markets rebound ahead of Wall Street open

By PAN PYLAS, AP Business Writer LONDON - European markets shed some early gains Thursday ahead of Wall Street's opening, but remained in positive territory, with British banking stocks in particular enjoying a strong rally in the wake of the government's 500 billion pound (US$865 billion) rescue plan.

European jitters appear to have been calmed by Wednesday's simultaneous interest rate cuts from the world's key central banks, even though lending between financial institutions remains limited, and despite mounting speculation that the U.S. may copy the British plan to buy stakes in banks to restore confidence in the battered U.S. financial system.

"Equities appear to offer value at current levels, they are clearly oversold in the short-term and policy-makers are, somewhat belatedly, taking action to support the system and the economy," said Tony Dolphin, director of economics and asset allocation at Henderson Global Investors.

By early-afternoon London time, Germany's DAX was 76.14 points, or 1.5 percent, higher at 5,,077.30, while France's CAC-40 was up 88.63 points, or 2.5 percent, at 3,585.52. The FTSE 100 index of leading British shares was 59.59, or 1.4 percent, higher at 4,426.28.

All three indexes had been around 3 percent higher earlier in the session, but some profit-taking ahead of the bell in New York appeared to prompt the modest retreat.

Nevertheless, Wall Street appears to be heading for a strong open after IBM Corp. reaffirmed its profit outlook and investors hoped that the panic selling that cascaded through global markets a day earlier was over, at least for now. Dow futures rose 136, or 1.46 percent, to 9,327.

Britain's benchmark index was helped higher by a positive reaction to the British government's rescue package, with shares in the two most troubled banking stocks gaining plenty of ground. HBOS PLC stock was up 30 percent, while Royal Bank of Scotland added 13 percent.

The British goverment pledged some 50 billion pounds to buy stakes in the country's major banks, as well as underpinning bank finances by a further 450 billion pounds (US$778 billion).

It wasn't just British banking stocks doing well today. In Germany, Hypo Real Estate Holding AG, which has received a government-sponsored rescue, was up more than 12 percent, Commerzbank AG bounced more than 9 percent and Deutsche Bank AG was nearly 6 percent higher.

The pressures will remain for some time, according to U.S. Treasury Secretary Hank Paulson, who warned that further banks in the world's largest economy will fail despite the US$700 billion bailout package agreed by U.S. lawmakers just last week.

Asked whether he would try something like the British plan, Paulson told reporters Wednesday that the U.S. Treasury has "a broad range of authorities and tools. ... We've emphasized the purchase of liquid assets, but we have a broad range of authorities. And I'm confident we have the authorities we need to work with going forward."

Asian markets were mixed overnight as investor enthusiasm over Wednesday's rate cuts around the world was tempered by ongoing fears about the strains in the credit markets and the prospect of a deep global recession, which would hit Asian exporters hard. South Korea, Hong Kong and Taiwan followed the lead of the world's leading central banks and lowered their interest rates too.

Tokyo's benchmark Nikkei 225 index rose more than 1 percent but fell back to close down 0.5 percent to 9,157.49, a five-year low. That followed a 9.4 percent plunge Wednesday, its biggest one-day drop since the 1987 market crash.
Hong Kong's Hang Seng index gained 3.6 percent to 15,985.39, while South Korea's key index rose 0.6 percent after earlier rising as much as 2.9 percent.