By Josie Cox and Tommy Stubbington
European markets endured another turbulent session Wednesday,
buffeted by a fresh slump and then a sudden and ferocious recovery
in the price of oil.
Brent crude, which is still down almost 40% so far this year,
climbed as high as $63 a barrel in late European trade, a 5%
appreciation on the day.
The commodity has repeatedly hit multi-year lows in recent days,
but some analysts Wednesday said that investors may now be
attempting to call the bottom of the slump.
"There might be a degree of short coverage ahead of the
holidays," said Gareth Lewis-Davies, an analyst at BNP Paribas. "It
is also possible that some people are trying to call the bottom of
the market, but it is too early to say if this is it," he added.
"Things could quickly reverse."
Stocks in Europe rose in response to the move. Having fallen in
early trade, mirroring a late slump on Wall Street Tuesday, the
Stoxx Europe 600 ended the session up 1%.
London's FTSE 100--with significant exposure to the oil and gas
sector through the likes of BP PLC and Royal Dutch Shell Group
PLC--finished 0.1% higher too, as Brent crude crept around 1.5%
higher on the day to $60.9 a barrel.
Even the Russian ruble enjoyed some respite.
The dollar declined almost 13% against the currency to around
60.66 in late European trade, after the country's finance ministry
said it has started selling its excess foreign currency holdings on
the market.
Earlier this week, the central bank dramatically increased the
country's key interest rate by 6.5 percentage points to 17% in a
desperate attempt to stem outflow, before the ruble on Tuesday
tumbled to yet another all-time low against the dollar.
Even though the ruble remains more than 45% lower against the
dollar so far this year, some investors Wednesday adopted a less
pessimistic tone on the Russian economy, than they've had in recent
days.
"Over the medium to longer term, we continue to expect
fundamentals to reassert themselves to drive the equity market
higher," said Michael Levy, investment manager at Baring Asset
Management, which manages around EUR36 billion ($45 billion).
"We scaled back our exposure to Russia as the situation in the
Crimea escalated and are monitoring the latest developments
closely, with a view to taking action as required," he said.
Moscow's Micex index ended the session 2.1% higher on the day,
while the dollar-denominated RTS index surged 14%, and David Kohl,
head of currency research at Julius Baer, said that he no longer
suggests selling the ruble--a recommendation he'd maintained since
April 2014.
"From a fundamental point of view the ruble is attractive and is
slowly becoming very attractive," he said.
The vast majority of asset managers, strategists and economists,
however, remain cautious, warning that it would be much too early
to say the crisis is over.
"Confidence in the country's currency and central bank have been
completely undermined," said Karl Steiner, a strategist at SEB.
"The central bank will probably increase its efforts to try to stop
the development, but experience shows that such a development is
difficult to reverse once it has been set in motion," he added.
Elsewhere on Wednesday, more volatility could stem from the
latest policy statement from the U.S. Federal Reserve as well as
the outcome of the first of up to three votes in the Greek
parliament to decide on a new president.
The Fed is expected by many to change its forward-looking policy
statement by removing language that it expects to keep interest
rates low "for a considerable period."
That could further unsettle markets, with the prospect of higher
U.S. rates making many emerging currencies less attractive to
investors.
Despite the ruble's rebound, the South African rand continued to
weaken against the dollar, dropping 0.6% to 11.73 Wednesday. The
Nigerian naira, another currency closely linked to oil prices, fell
to an all-time low against the dollar.
The S&P 500 was up around 1% on the day in late European
trade.
In Greece, meanwhile, lawmakers completed the first round of
voting on the country's president Wednesday, failing to reach the
supermajority needed to approve the candidate named by Prime
Minister Antonis Samaras, as expected.
With uncertainty still high, investors continued to seek the
safety of German bonds, with 10-year yields remaining at an
all-time low of 0.57%.
The euro was around 0.7% weaker against the dollar at $1.2415 in
late trade. Gold edged 0.1% higher to $1,195.30 per troy ounce.
--Georgi Kantchev contributed to this article
Write to Tommy Stubbington at tommy.stubbington@wsj.com and
Josie Cox at josie.cox@wsj.com
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