By Sara Sjolin, MarketWatch
LONDON (MarketWatch) -- European stock markets rose Tuesday,
rebounding from the biggest decline in a month, as investors
weighed the consequences of a government shutdown in the U.S. ahead
of a coming debate about lifting the country's debt limit.
"We had a fairly large selloff in the last couple of days, so
some of this was maybe already factored in," said Richard Perry,
chief market strategist at Central Markets in London.
"If you take a step back and look at it, the U.S. missing the
budget deadline may be a decent way in to the debt-ceiling talks.
The lawmakers will hopefully be so embarrassed that they come up
with a solution in better time. It's a much bigger issue because of
the risk of default," he added.
The Stoxx Europe 600 index added 0.8% to 312.86, recovering from
a 0.6% loss on Monday.
Shares of Telecom Italia SpA jumped 5.2% after Goldman Sachs
reinstated coverage of the firm with a buy rating. "We believe the
proposed changes to TI's controlling shareholder structure may
provide it an opportunity to delever its balance sheet, which could
lead to a significant positive change in strategy," Goldman Sachs
said.
Shares of Renault SA added 1.7% after data showed new French car
registrations for the auto maker jumped 18% in September.
Japan tax and U.S. government shutdown
Japanese stocks ended in positive territory after Prime Minister
Shinzo Abe announced plans to increase the nation's sales tax in
efforts to help the country's public finances and tackle the huge
debt pile.
U.S. stocks also rose on Wall Street, even as the lawmakers
failed to agree on a budget for the new fiscal year before the
deadline, prompting a partial closure of the government. The
shutdown is the first since 1996 and will leave thousands of
government workers furloughed and national parks closed. Other
services, including the issuing of Social Security checks and the
U.S. Mail, will continue.
"It is not a wise idea for politicians to play with the fragile
recovery," said Naeem Aslam, chief market analyst at Ava Trade, in
a note.
"The hope is that both Democrats and Republicans would come to
their senses soon enough to see what the consequences could be on
the markets by passing the temporary budget which could let the
government run in the [meantime]," he added.
The equity indexes on both sides of the Atlantic were also
buoyed by a measure of manufacturing activity in the U.S. rising to
the highest point in more than two years.
Europe data
Data confirmed that the euro zone's manufacturing sector
expanded for a third straight month in September, with the
purchasing managers' index in line with a preliminary estimate of
51.1, but lower than the 51.4 August print. A reading above 50
signals expansion.
Eurostat said unemployment in the currency union edged lower for
a third straight month in August, although not enough to affect the
overall unemployment rate, which held steady at 12%. The July
joblessness rate was revised lower after previously being reported
at 12.1%, which means the 12% rate was the lowest since December
2012. Germany's unemployment unexpectedly rose to 6.9% in
September.
"We see little momentum in the labor market picture at the
aggregate level. This reflects our view that although a recovery in
the euro area is well under way, it will take time for the rebound
in sentiment to feed through to actual hiring decisions," said Timo
del Carpio, European economist at RBC Capital Markets, in a
note.
Most country-specific indexes, however, ignored the downbeat
assessment and moved higher. France's CAC 40 index rose 1.3% to
4,196.60, while Germany's DAX 30 index gained 1.1% to 8,689.14.
Banks posted some of the biggest gains in the benchmarks, with
shares of Commerzbank AG up 3.2% in Frankfurt and Société Générale
SA 2.8% higher in Paris.
The U.K.'s FTSE 100 index closed slightly lower at 6,460.01.
Shares of Unilever PLC (UL) fell 3.4%, after the consumer-products
giant downgraded its sales-growth expectations for the third
quarter due to a slowdown in emerging markets.
Italy's FTSE MIB index jumped 3.1% to 17,977.06, bouncing back
after a 1.2% loss on Monday, as political tensions eased a bit
ahead of a confidence vote on Wednesday. Prime Minister Enrico
Letta scheduled the vote to avoid a snap election and seek backing
from parliament after Silvio Berlusconi over the weekend decided to
withdraw all of his People of Freedom party's ministers from the
government. Media reports said Monday afternoon that Berlusconi
faced dissent within his own party ahead of the vote, which could
halt his plans to bring down the government.
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