European stocks close higher on new bank rules

European stock markets closed higher yesterday, bouyed by agreement on new rules to strengthen the global banking sector against any fresh financial crisis and strong Chinese economic data.

Dealers said investors welcomed the regulations as positive for the banks, especially since they will be given more time to implement them and were glad that a major uncertainty had been removed.

News that Chinese industrial production picked up in August, rather than continued to slow, helped ease concerns the global powerhouse, which has largely driven the global recovery, was running out of steam. Other figures were equally strong.

As appetite for risk increase, the euro benefited, rising sharply against the dollar while bonds, which have attracted so much safe-haven support in recent months, fell as investors looked elsewhere for better returns.

In London, the FTSE 100 index of leading shares closed up 1.16 per cent at 5,565.53 points. In Paris, the CAC 40 index advanced 1.11 per cent to 3,767.15 points and in Frankfurt, the DAX gained 0.75 per cent to 6,261.68 points.

Elsewhere in Europe, Amsterdam rose 0.69 per cent, Brussels gained 1.60 per cent, Madrid added 0.71 per cent, Milan put on 0.81 per cent but Swiss stocks missed out on the advance, closing with a marginal gain of just 0.06 per cent.

Istanbul stocks closed up 2.7 per cent at a record high after the government won a key referendum on constitutional changes, boosting its chances of success in general elections next year.

In Asian trade earlier yesterday, Tokyo added 0.89 per cent, Hong Kong rose 1.89 per cent and Shanghai was up 0.94 per cent. Sydney jumped 1.20 per cent.The euro jumped sharply to $1.2871 from $1.2680 late in New York on Friday while the dollar fell to ¥83.66 from ¥4.17.

In New York, the blue-chip Dow Jones Industrial Average was up 0.56 per cent at around 1600 GMT, with the tech-rich Nasdaq Composite index gaining 1.53 per cent.

“Sentiment on Wall Street (received) a major boost from new international banking regulations and stronger-than-expected Chinese economic data,” said Joseph Hargett, Schaeffer’s Investment Research.

“Clarity and relief from the ... agreement on global capital requirements are helping support sentiment,” analysts at Charles Schwab said in a note.

“Banks will have a period of eight years to comply with the new capital rules, which is helping boost optimism in the sector’s ability to succeed in strengthening the global financial system.”