Mubarak Resignation Talk Lifts Stocks Off Lows
LONDON (AP) - Mounting speculation that Egypt's President Hosni Mubarak may be about to concede to protestors' demands and quit helped stock markets recover their poise on Thursday after big losses earlier.
Egyptian State TV has said that Mubarak will speak to the nation Thursday night from his palace in Cairo amid growing expectations that he will step down and hand over authority to Vice-President Omar Suleiman.
Investors hope that a Mubarak resignation will help ease tensions in the Arab world's most populous country and herald some calm following weeks of protests, which has at times descended into violence.
"News that Mubarak may stand down has seen international markets pare their losses a tad, which were quite markedly down earlier in the day," said David Buik, markets analyst at BGC Partners.
In Europe, the FTSE 100 index of leading British shares closed down 32.38 points, or 0.5 percent at 6,020.01 while Germany's DAX rose 19.38 points, or 0.3 percent, to 7,340.28. The CAC-40 in Paris ended 4.4 points higher at 4,095.14.
In the U.S., the Dow Jones industrial average was down 0.1 percent at 12,227 while the broader Standard & Poor's was flat just below 1,321.
Stocks in Europe and the U.S. were trading noticeably lower before the reports about Mubarak started coming out of Egypt as investors took a pause following a week-long advance that has sent many of the world's major indexes up to their highest levels since June 2008.
In the currency markets, investors had to grapple with renewed concerns over Portugal's debt mountain, which have taken a back seat over the preceding few weeks.
By late afternoon London time, the euro was down 0.8 percent on the day at $1.3615.
The trigger to the renewed debt crisis concerns was a sharp spike in Portugal's borrowing costs to a new euro-era high. However, widely-speculated European Central Bank intervention got the country's yields down. Figures Monday will indicate whether the ECB did indeed prop up Portugal's bonds following a two-week hiatus.
The clearest indication that the ECB was back in the markets was the fall in Portugal's ten-year yield to 7.30 percent from the earlier high of 7.6 percent.
Worries had eased over the past few weeks amid signs that the EU's leaders were preparing a comprehensive solution. However, the failure of EU leaders to agree anything substantial at a meeting last week reminded investors that the crisis hasn't gone away and Portugal could join Greece and Ireland in having to request a bailout to deal with its public finances.
"The good news that had propelled the euro higher has started to wane and the single currency is entering into a more uncertain period," said Nick Bennenbroek, head of currency strategy at Wells Fargo Bank.
Elsewhere, the Bank of England kept its benchmark rate unchanged at 0.5 percent, as largely expected despite some speculation in the markets that it might eventually raise rates earlier than expected.
That speculation has supported the pound in recent weeks, particularly against the dollar. Higher rates attract investors to a currency because of better returns on interest-bearing investments.
Despite recent figures showing that the British economy shrank in the final three months of 2010, there are worries within the rate-setting Monetary Policy Committee that inflation is getting too high due to sharp rises in energy and commodity costs - in December, the annual rate of inflation spiked to 3.7 percent, way ahead of the Bank's target of 2 percent.
The prevailing view in the markets is that the central bank will keep borrowing costs unchanged for a few months yet, partly because next week's updated quarterly economic forecasts from the Bank are likely to point to inflation falling back towards target over the medium-term.
"Given the huge amount of uncertainty about the underlying strength of both economic growth and inflation, the Committee would be foolish to rush into a premature tightening of policy," said Roger Bootle, economic adviser to Deloitte. "Indeed, as the fog clears, it should become clear that interest rates need to remain at an ultra low level indefinitely."
In the wake of the decision, the pound was 0.2 percent higher on the day at $1.6123.
Earlier in Asia, Japan's Nikkei 225 stock average slipped 0.1 percent to 10,605.65 as investors shied away from big moves ahead of a long weekend, while Hong Kong's Hang Seng index slid 2 percent to 22,708.62 - its first close below 23,000 this year.
Bucking the trend was China, where investors snapped up bargains in banks and property shares following a selloff that was sparked by China's interest rate hike. The benchmark Shanghai Composite shot up 1.6 percent to 2,818.16 and the Shenzhen Composite Index for China's smaller market surged 2.9 percent to 1,220.58.
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Pamela Sampson in Bangkok contributed to this report.