By Josie Cox
European stocks edged higher Friday, reversing a two-session
selloff, thanks to a revival in investors' appetite for riskier
assets despite lingering geopolitical concerns.
Global stocks had suffered sharp declines over the previous two
days, burdened by downbeat economic data in the U.S. and fresh
tensions in the Middle East as Saudi Arabia and other Gulf states
launched airstrikes against rebel forces in Yemen's capital.
That triggered a rush into assets deemed less risky during times
of volatility, such as gold and the yen, and away from stocks. On
Friday, however, that move showed signs of unwinding.
Ian Williams, economist and strategist at brokerage Peel Hunt
said that the recent selloff should be "attributed to technical and
liquidity considerations, rather than any significant shift in the
fundamentals." Nick Lawson, a senior equity trader at Deutsche Bank
echoed this, saying it was likely a "knee-jerk reaction" triggered
by market levels and the news out of Yemen.
The Stoxx Europe 600 index ended the session 0.3% higher while
Germany's DAX and France's CAC both rose 0.2% and 0.6%
respectively.
London's FTSE 100 was the notable underperformer of the region,
weighed in part by a slide in mining stocks on news that Chile's
copper mining industry has been hit by torrential rain that has
forced the shutdown of some of the world's largest mines.
Yields on so-called peripheral eurozone government bonds also
fell marginally, a further sign of a slight pickup in investor
appetite for riskier assets.
"Investors have some worries," said global market strategist
Kerry Craig at J.P. Morgan Asset Management, adding however, that
this is still an environment where asset managers fundamentally
want to have exposure to risk assets.
The euro slid against the U.S. dollar in early trade after
inching higher during the previous two sessions. By early
afternoon, though, it had stabilized before gaining ground against
the dollar. Into the end of the session one euro bought just under
$1.09.
Still, this represents a loss so far this year to just over 9.5%
as a symptom of the stark divergence between monetary policy in the
U.S. and in Europe.
"It seems that investors aren't convinced that the pause in the
appreciation of the U.S. dollar is anything but temporary," said
Tim Ash, an economist at Standard Bank. Morgan Stanley strategists
in a note on Friday also recommended buying recent "dollar
dips".
Elsewhere, the buck also rose against Japan's yen after figures
showed that Japanese consumer prices were flat from a year earlier
in February, deepening worries that the country is heading back
toward deflation two years after its central bank launched a
radical economic-revival program.
Later, it retraced, however to trade flat on the day at
Yen119.14.
In the U.S., the S&P 500 crept higher in late European trade
after figures showed that gross domestic product, the broadest
measure of goods and services produced across the economy, expanded
at a seasonally adjusted annual rate of 2.2% in the fourth quarter.
That was unchanged from its previous estimate last month.
"Concern is already now on how low [U.S. growth in] the first
quarter of 2015 is going to be," strategists at Rabobank wrote in a
note.
In commodity markets, Brent crude was trading 2.7% lower at
$57.60 per barrel after a sharp rally on Thursday, spurred by the
Yemen airstrikes. Gold was 0.4% lower at $1,200 per trout
ounce.
Write to Josie Cox at josie.cox@wsj.com