European stock markets closed sharply higher yesterday in a technical rebound driven by growing hopes that a rescue deal for debt-stricken Ireland will be announced shortly, dealers said.
They said a very strong lead from Wall Street where US auto icon General Motors returned to the market gave European investors a further boost in afternoon trade, helped too by positive US jobs data.
In London, the FTSE 100 index of leading shares closed up 1.34 per cent at 5,768.71 points. In Paris, the CAC 40 jumped 1.99 per cent to 3,867.97 points and in Frankfurt the DAX gained 1.97 per cent to 6,832.11 points. Stocks in Dublin put on 2.58 per cent as EU, International Monetary Fund and European Central Bank officials arrived to assess Ireland’s financial crisis.
Ireland could receive “tens of billions” of euros as part of an EU-IMF rescue package, the head of Ireland’s Central Bank said yesterday.
Patrick Honohan said he expected that a “very substantial loan, tens of billions” would be made to prop up Ireland’s crisis-hit economy.
“Discussions still continue at the EU-IMF and European Central Bank level with the Irish government,” said VTB Capital economist Neil MacKinnon. In our view it is just a matter of time before a support package for the banks is finalised.”
Market talk has it that Ireland could be bailed out with about €90 billion just six months after another vulnerable eurozone member, Greece, was rescued with €110 billion.
“Everyone realises that Dublin has no choice but to accept help to save its banking system,” said Guillaume Garabedian, dealer with Meeschaert Gestion Privee in Paris.
The euro meanwhile rallied to $1.3616, up from $1.3530 in New York late last Wednesday.
Gold was firmer at $1,350.25 an ounce, up from $1,337.50 on Wednesday. In New York, the blue-chip Dow Jones Industrial Average jumped 1.64 per cent by around 1700 GMT, with the tech-rich Nasdaq Composite up 1.99 per cent
Dealers said the market was driven by GM after a near 18-month absence in bankruptcy, with GM chief executive Dan Akerson ringing the opening bell to loud applause from the trading floor.
GM shares, sold at $33 in what may turn out to be the biggest corporate share offer ever, were up
Positive jobs data, alongside the Irish lead, also helped sentiment, dealers said. New US jobless claims rose only slightly last week after a recent sharp drop and at 439,000 were less than analyst forecasts for 442,000.
Elsewhere in Europe, Amsterdam was up 1.40 per cent, Brussels gained 1.74 per cent, Madrid added 1.33 per cent, Milan put on 1.17 per cent and Swiss stocks rose 1.82 per cent
In Asian trade earlier Thursday, Tokyo hit a five-month high with a gain of 2.06 per cent, Hong Kong jumped 1.82 per cent and Shanghai rose 0.94 per cent, after sliding around 10 per cent over the previous four sessions on fears Beijing will try to cool a booming economy given fears over rising inflation. Sydney gained 0.34 per cent.