LONDON (AP) — Stocks in Europe and on Wall Street rebounded Wednesday as a bigger than anticipated fall in weekly U.S. jobless claims helped boost investor sentiment following days of negative news related to Europe's debt crisis.
The improvement in markets also helped the euro recoup some recent lost ground — when investors have a greater appetite for risk, stocks usually get a boost, while the dollar loses some of its safe haven shine.
In Europe, the FTSE 100 index of leading British shares closed up 75.82 points, or 1.4 percent, at 5,657.10 while Germany's DAX surged 118.80 points, or 1.8 percent, to 6,823.80. The CAC–40 in France ended 23.19 points, or 0.6 percent, higher at 3,747.61.
In the U.S., the Dow Jones industrial average was up 128.43 points, or 1.2 percent, at 11,164.80 around midday New York time, while the broader Standard & Poor's 500 index rose 14.90 points, or 1.3 percent, to 1,195.63.
Stocks took a hit Tuesday on news of the exchange of artillery between North Korea and South Korea and mounting worries that Europe's debt crisis was headed for Portugal and even Spain.
Though contagion worries lingered, sentiment was shored up by a generally positive batch of U.S. economic reports. Data showed that U.S. jobless claims last week fell by 34,000 to 407,000, their lowest level since July 2008. The fall was far larger than anticipated.
An improving jobs situation is crucial if the U.S. economy is going to start growing more quickly. That will help shore up the global economic recovery at a time when Chinese growth is expecting to come off the boil.
"There's nothing like a recovering economy to deter fear it would seem," said Andrew Wilkinson, senior market analyst at Interactive Brokers.
A survey from the Ifo Institute showing German business confidence in November at its highest level since the reunification of east and west in 1990 helped support European stock markets early on, particularly on the DAX index, which outperformed all its peers.
In currencies, the euro oscillated wildly during the day but by late afternoon London time was 0.1 percent higher at $1.3370. It had earlier touched a two–month low of $1.3284 and reached as high as $1.3421.
Most analysts think the euro will continue to face headwinds in the near term as there seems to be no end to the single currency zone's debt problems. It's clear in the bond markets at least that the prospective Irish bailout has done little to alleviate concerns that the crisis will spread to Portugal, where a public sector strike Wednesday highlighted the difficulties the government will have to implement its austerity program.
By late afternoon London time, the rate on Portugal's 10–year bonds was up 0.09 percentage point at 7 percent. Though lower than the earlier high of 7.08 percent, the cost of servicing debt remains elevated and not far below the 9 percent mark that effectively forced the Irish government's hand.
Spain's equivalent bond yield rose 0.16 percentage point to 5.06 percent.
In Ireland, the embattled government outlined the euro15 billion worth of austerity measures it is planning over the coming four years in return for an expected euro85 billion bailout from its partners in Europe and the International Monetary Fund.
Though it said it is cutting the minimum wage, getting rid of 25,000 public sector workers and raising sales taxes, the government revealed that it won't be touching the super–low corporation tax of 12.5 percent.
Investors' reactions were muted, in the knowledge that a general election will most probably take place early next year. The yield on 10–year Irish bonds remains near record highs around 9 percent.
One worry among policymakers is that Spain may become embroiled — if the country is left with no alternative but to ask for loans to pay off debts, then some believe the euro project itself could be in jeopardy. Spain accounts for around 10 percent of the eurozone economy, whereas the other three countries account for around 2 percent each.
"The Spanish government will face the market head–on next month insofar as two more bond auctions are still scheduled for this year," said Jane Foley, an analyst at Rabobank International. "Investor appetite at these auctions will be an important litmus test as to whether or not Spain has done enough to hold investor confidence."
On Thursday, the market focus will likely remain on Europe's debt crisis, especially as U.S. markets will be closed for the Thanksgiving break.
Earlier in Asia, investors had their first real opportunity to respond to the artillery clash between North and South Korea Tuesday.
Though South Korea's financial markets opened 2.4 percent lower the Kospi ended down only 0.2 percent at 1,925.98.
Japan's Nikkei 225 stock average fell 0.8 percent and Hong Kong's Hang Seng index finished up 0.6 percent. Chinese shares rebounded in active trading, with the benchmark Shanghai Composite Index gaining 1.1 percent.
The rebound in stock markets helped oil prices, too, with benchmark crude for January delivery up $1.73 to $82.98 a barrel in electronic trading on the New York Mercantile Exchange.
