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Europe shrugs off Asian angst

London, Sept. 25 (Reuters): European stocks rose but Asian shares lost heart as the Fed’s decision to keep rates on hold sent US markets to fresh lows on Tuesday.

In Europe, a German business sentiment survey came in bang in line with expectations, lifting market spirits. Stocks plumbed a five-and-a-half year trough but turned and headed into positive territory after the closely watched west German business climate index for September eased to 88.2 from 88.8.

By 1535 GMT, with only Frankfurt officially trading, the FTSE Eurotop 300 index of pan-European blue chips was up 1.1 percent at 818 in healthy volumes, with gainers beating losers by about two to one. The narrower DJ Euro Stoxx 50 index of euro zone blue chips added 1.7 percent to 2,225. “This indicates the economic situation is not as weak in the third quarter as everyone is saying,” said Heinrich Engelke of Bankgesellschaft Berlin. There were others who felt differently though. “This is a very short-term relief rally,” said Corne Biemans, global portfolio manager at Fortis Obam fund in Utrecht.

Yields on euro-denominated government bonds, at fresh 10-month lows in early trade on strong post-Fed gains by US Treasuries, also rose.

The Dow was up 10 points, or 0.14 percent, at 7,693, after dropping 2.4 percent to a four-year low on Tuesday. The broader Standard & Poor’s 500 Index was up 1 point, or 0.19 percent, at 820. The Nasdaq Composite rose 7 points, or 0.63 per cent, to 1,189.

Asian agony

Asian shares fell after the war threat underpinned oil prices even as crude dipped further from Tuesday’s 19-month peak on news of a large rise in US gasoline stockpiles. The benchmark Nikkei average in Tokyo closed 1.68 per cent lower, and by mid-session indices were down by one per cent in Hong Kong and by around 2.6 per cent in Singapore and Malaysia, the weakest Asian markets.

Nikkei lost 156.23 points to close at 9,165.41, ending lower for a third session after falling back below its level before the Bank of Japan (BOJ) shocked investors by saying it would buy shares directly from banks.

Since then, Prime Minister Junichiro Koizumi said he would not compile any complementary measures to clean up the banking sector until October.

Singapore’s Strait Times Index was one of the biggest fallers in Asia, dropping 2.58 per cent by midday after hitting a 10-month low at 1,336.68.

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