World markets rally as swine flu fears diminish

[March 19, 2010]  LONDON (AP) -- World stock markets rallied Wednesday after better-than-expected U.S. data fueled hopes that the world's largest economy was showing tentative signs a recovery is imminent and fears faded -- for now -- over the economic impact of a possible swine flu pandemic.

After two days of declines, the main Asian and European markets posted broad-based gains, with airline stocks -- slammed in recent days amid worries about the disease's toll on travel -- up sharply.

By mid morning London time, the FTSE 100 of leading British shares was up 22.12 points, or 0.5 percent, at 4,118.52, while Germany's DAX rose 28.53 points, or 0.6 percent, to 4,635.95. France's CAC-40 was 24.68 points, or 0.8 percent, at 3,075.79.

Asia's markets did better earlier, partly because they bore the brunt of the swine flu-related losses on Tuesday. Hong Kong's Hang Seng gained 401.84 points, or 2.8 percent, to 14,956.95, and Shanghai's main index added 2.8 percent to 2,468.19.

The latest bout of buying was stoked Tuesday when surprisingly strong U.S. consumer confidence and housing data helped ease the markets' fears about swine flu, which had dominated market sentiment for the first part of the week.

"Markets, like the British weather at this time of year, are changeable moving from the prospective gloom of swine flu to data-related optimism in the space of a trading session," said Daragh Maher, an analyst at Calyon Credit Agricole.

"But the overall message remains one of uncertainty, a lack of clarity and an unwillingness to extend any trend too far," he added.

Modest buying was expected when Wall Street opens for business later. Dow futures were up 54 points, or 0.7 percent, at 8,021 while the broader Standard & Poor's 500 futures rose 6.2 points, or 0.7 percent, to 858.

Despite the pickup Wednesday, the markets remain on guard for any developments regarding the spread of the swine flu virus after the World Health Organization raised its alert level from three to four, which is just two steps short of it declaring a full pandemic.

Though testing of potential cases is taking place around the world and governments prepare their defenses against a widespread outbreak, there are some hopes that the virus may be becoming less virulent the further away it is from Mexico, its apparent source.

So far swine flu is suspected of killing more than 150 people in Mexico and sickening over 2,000 there.

The World Health Organization has confirmed 105 other cases in seven countries. Over half of those are in the United States, but Mexico is the only country where deaths have been confirmed.

"The big story from earlier in the week -- swine flu -- does seem to be taking something of a back seat, although any escalation of the situation still holds the risk that investors will be rushing for the exits and a sharp sell-off across the board could follow," said Matt Buckland, a dealer at CMC Markets.

Big gainers Wednesday were the airlines which had taken a battering earlier in the week. In Europe, Deutsche Lufthansa AG rose 5 percent while British Airways PLC bounced back 4 percent. The gains were even more startling in Asia, with Hong Kong's Cathay Pacific spiking nearly 6 percent and Air China soaring over 11 percent.

Most interest later will center on the U.S. Federal Reserve, which wraps up its latest two-day meeting. After the bank's $1.2 trillion measures last month to kick start the economy -- including buying Treasury bonds -- the market is not counting on any major announcements. But analysts say the flu outbreak, along with continuing troubles at banks and credit markets, could elicit an unexpected response.

Earlier in Asia, South Korean shares led the region after the country posted a record current account surplus in March. The Kospi benchmark finished higher by 38.18 points, or 2.9 percent, to 1,338.42.

Markets in Singapore, India and Taiwan also gained. Australian shares closed modestly lower after a seesaw session.

Financial markets in Japan were closed for a national holiday and will reopen Thursday.

Oil prices were up modestly, with benchmark crude for June delivery climbing 69 cents to $50.61. The contract slipped 22 cents to settle at $49.92 overnight.

In currencies, the dollar gained to 96.87 yen from 96.55 yen. The euro rose to $1.3227 from $1.3134.

[Associated Press; By PAN PYLAS]

AP Business Writer Jeremiah Marquez in Hong Kong contributed to this report.

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.