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Last Updated: Wednesday, 24 May 2006, 20:38 GMT 21:38 UK
US shares up while market jitters
Stock market trader talking on phone
Even though it looks worrying, price volatility helps traders make money
US shares closed ahead after a day of see-sawing as jitters continued across global stock markets.

The Dow Jones and Nasdaq both opened lower, reflecting declines in leading European markets, and fluctuated all day before settling in the black.

Europe's main share indexes all lost value with the FTSE 100, the Cac 40 and the Dax down more than 1.2% by close.

Worries about inflation and interest rate rises in the US have overshadowed corporate profits growth.

Analysts expect volatile trading to continue.

Cautious mood

Weighing on the markets is the fear that higher interest rates needed to rein in inflation could kill off the global economic recovery in the process.

Higher borrowing costs put a brake on consumer spending and corporate investment, squeezing profits and jeopardising growth.

The cautious mood persisted in the US, with the Dow Jones and Nasdaq managing to end ahead by 0.17% and 0.48% respectively after an inconclusive day.

The confused directions of the markets were reflected in two economic reports - one showing sales of new housing had risen, the other that demand for durables such as aircraft and computers was down.

"People are still on very skittish ground here," said Miller Tabak & Co analyst Peter Boockvar.

"Every single rally has failed. The market seems to be in a corrective phase."

'No panic'

In Europe, the UK's main FTSE 100 share index closed down 91.6 points, while Germany's Dax and France's Cac ended the day down 91.26 points and 61.51 points respectively in late afternoon trading.

In India, another volatile day of trading saw the BSE Sensex index lose much of the 341 points gain made on Tuesday, closing down 2.3% or 249 at 10,573.

Analysts say that even though there are concerns that price growth may accelerate and push up interest rates, the sell-off means share prices are coming back to levels that could make them attractive to investors.

As a result, they predict that the declines may be short-lived.

Electronic price board showing drop in Asian stocks
The strength and speed of the sell-off caught many people by surprise

Market watchers said they expected a period of consolidation, rather than a rapid recovery, with a lot depending on the quality of earnings and economic reports released in coming weeks.

"We are sceptical if there is anything fundamental about these falls," said Tristan Hanson of Cazenove. "It is more panic."

Japan's Nikkei 225 index rebounded strongly on Wednesday as a weaker yen lifted optimism that exporters, including camera firm Canon and carmakers Toyota and Honda, would benefit and foreign sales increase.

Dollar rebounds

One of the main areas of concern has been the rapid rise of commodity prices, amid fears that a market bubble is about to burst.

On Wednesday, investor selling pulled gold prices down by 6%.

Meanwhile, crude oil prices, one of the main factors behind the inflation fears, dipped as supply concerns eased.

In London, a barrel of Brent crude fell back $1.88 cents to $69.22 and a barrel of light crude slid 2.7% or $1.90 to $69.86 in New York.

The US dollar had rebounded against both the yen and euro in Asian trading, and climbed against most major currencies after the report on housing sales increased speculation that interest rates may be hiked next month.


MARKET DATA - 11:36 UK

FTSE 100
5429.64up
23.70 0.44%
Dax
5733.05up
19.54 0.34%
Cac 40
3784.02up
14.48 0.38%
Dow Jones
10403.79up
78.53 0.76%
Nasdaq
2273.57up
35.31 1.58%
S&P 500
1115.71up
11.22 1.02%
BBC Global 30
5707.15up
20.65 0.36%
Data delayed by at least 15 minutes

SEE ALSO:
Q&A: Turmoil on world markets
18 May 06 |  Business
US shares fall as Europe rebounds
23 May 06 |  Business
Global markets feeling pressure
22 May 06 |  Business
US shares flat after tricky week
19 May 06 |  Business
Weaker dollar hits world markets
12 May 06 |  Business
US rates raised to five-year peak
10 May 06 |  Business



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