US sales lift European shares

Wall Street also rose, gearing up for the first two straight days of gains in more than a month.

Gains on both sides of the Atlantic followed one of the most volatile weeks in years, as investor sentiment oscillated wildly.

At times, investors cheered anti-crisis measures, such as the European Central Bank’s decision to support the bonds of Italy and Spain; at others their mood soured amid concerns over the state of the global economy and the exposure of banks to the debt of countries like Greece.

However, as the week progressed, the mood seemed to have calmed somewhat.

In Europe, London’s FTSE 100 jumped 3 % to 5,320.0, while Germany’s DAX was 3.5 % higher at 5,997.7. The CAC-40 in France gained 4 % to 3,213.8, even after data showed the French economy did not grow in the second quarter.

In the US, The Dow Jones Industrial Average increased 1.6 % to 11,318, while the broader Standard & Poor’s 500 index was up 0.5 % at 1,186.

Sentiment today was lifted after the US Commerce Department said that retail sales rose 0.5 % last month, the best showing since a 0.8 % advance in March.

“July retail sales were remarkably buoyant across the board, which speaks volumes for the US consumer’s ability to remain resilient in the face of dysfunctional politics in Washington, market disruptions on Wall Street and economic challenges on Main Street,” said Michael Woolfolk, managing director at BNY Mellon.

The figures come just a week after the downgrade of the US’s credit rating, which contributed to this week’s market turmoil.

The gains in Europe came after regulators in France, Italy, Spain and Belgium imposed temporary bans on short-selling of financial shares late on Thursday, following sharp sell-offs and temporary gains in French bank shares in particular that were blamed on false rumours. Greece had already banned short-selling on Monday.

The share prices of French banks, which fluctuated sharply in recent days, jumped today, with Societe Generale up 5.7 % and Credit Agricole gaining 2.1 %.

In Belgium, Dexia, which had also been under pressure, was doing particularly well, ending the day 17 % higher.

However, analysts questioned whether the short-selling ban would be successful in the long run, since many experts claim that a similar move in 2008 actually contributed to investor uncertainty.

Short selling is a way for an investors to bet a stock will go down. It is done by selling borrowed shares in hopes of buying them back at a lower price and pocketing the difference. Regulators in Germany and Britain did not ban the practice.

The better mood in Europe came despite figures showing France’s economy unexpectedly ground to a halt in the second quarter on the back of a sudden reversal in consumer spending and stagnation by the country’s exporters. France is already facing speculation that it may soon lose its AAA rating due to its high debt load.

Data also showed that Greece’s economy shrank 6.9 % in the second quarter from the year before.

But the euro was seemingly unaffected by the French and Greek data, rising 2 % to 1.424 dollars.

Earlier in Asia, the session was far less volatile than of late.

Hong Kong’s Hang Seng added 0.1 % to 19,620.01. Australia’s S&P/ASX 200 gained 0.8 % to 4,237.90, while benchmarks in New Zealand and Singapore also rose.

Japan’s Nikkei 225 stock average, however, was lower – closing down 0.2 % to 8,963.72.

Mainland Chinese shares traded higher for a fourth day, with the absence of bad news helping boost sentiment, traders said. The Shanghai Composite Index gained 0.5 % to 2,593.17 while the Shenzhen Composite Index gained 1 % to 1,158.96.

Oil markets were mostly stable, with crude rising 16 cents to 85.83 dollars a barrel, after earlier rising above 87 dollars.