U.S. and European stock markets clawed back some gains Tuesday following hefty losses around the world over the last 24 hours, as investors breathed a sigh of relief following better than expected U.S. housing data.
The FTSE 100 index of leading British shares was up 26.15 points, or 0.6 percent, at 4,352.16 while France's CAC-40 index rose 15.89 points, or 0.5 percent, to 3,235.47. Germany's DAX was 26.40 points, or 0.5 percent, higher at 4,916.34.
On Wall Street, the Dow Jones industrial average was up 14.51 points, or 0.2 percent, at 8,626.64 soon after the open while the broader Standard & Poor's 500 index rose 3.36 points, or 0.4 percent, to 927.08.
On Monday, U.S. and European stock markets tumbled as commodity prices fell and weak U.S. manufacturing data diminished expectations about the speed of any recovery in the world's largest economy. The selling continued into the Asian session.
Some hopeful signs emerged with the news that home construction in the U.S. jumped 17.2 percent in May _ the largest amount in three months _ to 532,000 units. That topped the 500,000 economists had expected. And applications for building permits _ seen as a good indicator of future activity _ rose 4 percent in May to an annual rate of 518,000 units.
"The bottom line is that housing activity appears to have found a floor, albeit at a low level," said Paul Dales, U.S. economist at Capital Economics.
It wasn't all good news out of the U.S. though. The Federal Reserve reported that U.S. industrial production fell by a monthly rate of 1.1 percent in May, up from the 0.7 percent fall recorded in April. The sharper rate of decline was due largely to the closure of some auto plants related to the bankruptcy of Chrysler.
Though industrial production is not falling off a cliff as it appeared to be doing earlier in the year, the data did little to help stoke the economic optimism that drove markets sharply higher between March and June.
The stock market rally since March's lows has been fueled by hopes that the U.S. economy in particular will recover from recession sooner than previously anticipated. As equities usually start rising 6 to 9 months before actual recovery emerges in the official data, this suggests investors believed the massive sell-off in markets during the most acute phase of the financial crisis was overdone. Some of the world's major equity indexes are now in positive territory for 2009.
That optimism has dissipated in recent days, however. Rising interest rates on U.S. government bonds and higher oil prices have combined to worry investors that any recovery around the world could be choked off at birth. Worries about the banking system continue to dog markets too, with Bank of America Corp. the biggest faller on the Dow.
National Bank of Greece saw its share price slide by around 10 percent after it announced that it is planning a euro1.25 billion rights issue to shore up its capital position. The bank's rights issue plan came just a day after the European Central Bank warned that the banks in the 16-country single currency zone face potential bad loan losses of $283 billion by the end of 2010.
Earlier in Asia, Japan's Nikkei 225 stock average shed 286.79 points, or 2.9 percent, to 9,752.88 even as the central bank said the country's economic conditions "have begun to stop worsening", while Hong Kong's Hang Seng slid 333.46, or 1.8 percent, to 18,165.50. Australia's index lost 1.7 percent, Singapore retreated 1.5 percent and the Philippine market dived 3.8 percent.
"Yesterday's thumping sell-off in both Europe and the U.S. has been followed by declines in Asia as investors seemingly grow ever more skeptical as to the validity of claims that the green shoots of recovery are anything more than prime fodder for bears to maul," said Matt Buckland, a dealer at CMC Markets.
Elsewhere, oil prices rose modestly as the dollar weakened after Russian President Dmitry Medvedev told a regional summit that the world needs new reserve currencies. In recent months, the fall in the dollar has gone hand in hand with rises in commodity prices, and that in turn has helped fuel a sharp rally in mining and energy stocks.
Benchmark crude for July delivery rose $1.72 to $72.34 in electronic trading on the New York Mercantile Exchange, while the euro rose 0.7 percent to $1.3872 and the dollar fell 0.9 percent to 96.76 yen.
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AP Business Writer Stephen Wright in Bangkok contributed to this report.
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