European stocks rise as Germany seeks to soothe markets

European stocks mostly rose yesterday, buoyed by positive US economic data and statements by German Chancellor Angela Merkel seeking to ease tensions on markets anxious over eurozone debt strains.

London’s FTSE 100 index added 0.74 per cent to finish at 5,698.93 points, while in Frankfurt the DAX gained 0.82 per cent to reach 6,879.66 points, and in Paris the CAC 40 rose 0.34 percent to 3,760.42 points.

Earlier yesterday, Asian markets edged up after a strong showing on Wall Street overnight on economic data suggesting a US recovery may finally be gaining traction.

Markets were closed yesterday in the United States for the Thanksgiving public holiday, leaving European investors short of a lead later in the day.

Trading “volumes were rather weak due to Thanksgiving, but the Irish problem was not concealed,” said Aurelien Hotton, a stock consultant at SwissLife Gestion Privee.

Ireland on Wednesday an­nounced a new four-year austerity package as it seeks to wrap up talks on a €85 billion EU-IMF bailout by Sunday.

The possibility that other eurozone countries could be forced to seek help, and plans for a new rescue mechanism that could see investors share the burden of bailouts has also rattled markets.

Ms Merkel sought to ease those tensions, insisting that stability in the 16-nation bloc had improved and that no member was in danger of having to restructure its debt.

She made clear that a proposal for investors to shoulder part of the costs of national bailouts would apply only after an existing rescue scheme expired in 2013, addressing critical uncertainty behind recent market turmoil.

Nevertheless, the markets in Portugal and Spain, the countries under most pressure by investors who see them as the most likely the next link in the eurozone debt chain to snap after Ireland.

In Madrid the IBEX-35 index dipped 0.21 per cent while in Lisbon the PSI-20 slipped 0.37 per cent.

Spain’s debt risk premium rose to a record high on Wednesday as the Irish banking and debt catastrophe deepened concern about the eurozone’s weakest economies.

Investors are punishing the country because the Irish crisis reawakens fears about the Spanish property-dependent economy and banking sector.

Spain’s economy is far larger. It accounts for 12 per cent of economic output among the 16 nations that use the euro currency, equal to twice that of Ireland, Portugal and Greece combined. Some analysts have described it as “too big to fail” but also “too big to save”.

Elsewhere in Europe, Milan was nearly stable showing a 0.02 per cent gain, Amsterdam rose 0.47 per cent and the Swiss Market Index climbed 0.81 per cent.

In Asia, Tokyo’s Nikkei index climbed 0.50 per cent, Hong Kong’s Hang Seng rose 0.13 per cent, Shanghai’s Composite Index jumped 1.34 per cent, Sydney’s S&P/ASX 200 rose 0.19 per cent and Seoul’s Kospi index edged up 0.09 per cent.