LONDON, June 25 (Reuters) - Soothing words from central bankers in China and the United States calmed investors on Tuesday and contributed to European shares bouncing off seven-month lows.
The FTSEurofirst 300 provisionally closed up 15.71 points, or 1.4 percent at 1,129.90, having closed at its lowest since late November 2012 in the previous session spooked by liquidity worries after the Federal Reserve said it would begin stimulus withdrawal in the U.S later this year and credit tightening in China.
“The pullback has been healthy. You could argue that it has cleared out some of the more speculative (risky) positions,” Philip Poole, global head of macro investment strategy at HSBC, said.
“One of the problems with quantitative easing is that it is meant to stimulate the real economy but a lot of the liquidity pumped in was sitting in the financial sector ... creating the possibility of assets bubbles building and central bankers were concerned about that,” he said.
Helping calm the storm that had seen European shares fall as much as 11.4 percent since May 23, China’s central bank said that it would guide rates to reasonable levels and two U.S. Federal Reserve officials downplayed the notion of an imminent end to monetary stimulus.