European markets show strong gains

European stock markets re-bounded yesterday as investors sought out bargains after recent sustained losses, with confidence helped by an apparent easing in concerns over the European debt crisis.

The strong gains in Europe mirrored a robust performance in Asia, which was buoyed by positive Australian central bank comment, and were then helped by a positive start to the day on Wall Street. The London FTSE 100 index rose 2.93 per cent to close at 4,965 points while in Paris the CAC 40 jumped 2.73 per cent to 3,423.36 points. The Frankfurt DAX added 2.15 per cent at 5,940.98 points.

Elsewhere Madrid soared 3.59 per cent, Milan gained 2.70 per cent, the Swiss Market Index rose 2.03 per cent and Amsterdam put on 2.66 per cent.

"It's amazing what a difference a few well chosen words can make," said analyst Michael Hewson of CMC Makets.

He said a meeting on Monday of the Reserve Bank of Australia "should have been a fairly routine affair, with rates left unchanged at 4.5 per cent.

"However the statement that accompanied the rate announcement has been seized upon by investors as a green light to pile back into equities today."

The bank soothed investors with an upbeat assessment of China, the driver for much of the recent global growth.

"The RBA comments regarding its confidence in the Chinese economy have no doubt helped restore some investor confidence, hence the rally in Asia equity markets which has filtered through into Europe today," said Mr Hewson.

RBA governor Glenn Stevens said Asia and Latin America were experiencing healthy growth while momentum in China, Australia's top trading partner, appeared to be moderating to a "more sustainable rate".

In London, troubled oil giant BP rose 3.66 per cent after it ruled out issuing new shares to meet costs arising the Gulf of Mexico oil spill disaster.

In Paris, financials led the way, with Société Générale Bank adding 6.27 per cent and BNP Paribas 4.23 per cent.

The RBA comments boosted commodity issues in Frankfurt, where steel maker ThyssenKrupp gained 4.65 per cent and HeidelbergCement 3.90 per cent.

On Wall Street, stocks overcame news of a sharper-than-expected fall in growth in the services sector, with the Dow Jones Industrial Average up 1.55 per cent at 9,837.09 at mid-day. The tech-heavy Nasdaq gained 1.95 per cent to 2,132.67.

The Institute of Supply Management said its non-manufacturing index declined to 53.8 points from 55.4 in May.

Most economists had expected the June figure to be at 55.0 after relatively steady readings in the prior three months.

The latest data indicated "continued growth in the non-manufacturing sector but at a slightly slower rate," Anthony Nieves, chairman of the ISM's non-manufacturing business survey committee, said in a statement.

"The index still shows modest improvement from earlier in the year but the June reading does suggest some loss of momentum at the end of the second quarter," said Aaron Smith, a senior economist for Moody's Economy.com.

Elsewhere, sluggish Asia-Pacific markets showed signs of reviving yesterday led by a rebound in Shanghai.

Shanghai's Composite Index gained 1.92 per cent after hitting a 15-month low the day before, with banks and property developers rising on bargain-hunting, dealers said.

Sydney rallied 1.28 per cent, Hong Kong rose 1.22 per cent and Tokyo added 0.77 per cent.