European stock markets and the euro bounced back yesterday supported by strong US and Chinese data as bond market pressures eased on financially vulnerable eurozone states.
Sentiment was also supported by Spain’s disclosure of new measures to cut costs and revive the country’s ailing economy amid fears Madrid too might have to follow the lead of Greece and Ireland and seek outside financial help.
The turnaround came after two days of turmoil after an announcement on Sunday the EU and the IMF would provide Ireland with €85 billion to shore up its banking sector and meet its debt obligations.
That gesture intensified speculation that Ireland’s fellow eurozone financial stragglers, Portugal and Spain, could also need a bailout in due course. But yesterday, the interest rate, or yield, on 10-year Portuguese and Spanish bonds narrowed, suggesting an easing in tension.
European stock markets posted solid gains, with London’s FTSE 100 index rising 2.07 per cent to close at 5,642.50 points. In Paris, the CAC 40 added 1.63 per cent to 3,669.29 points while in Frankfurt the DAX jumped 2.66 per cent to 6,866.63 points.
Elsewhere Madrid soared 4.44 per cent, Milan 2.41 per cent and the Swiss Market Index 1.54 per cent.
In Madrid, Socialist Prime Minister Jose Luis Rodriguez Zapatero announced that the government would sell 30 per cent of the state lottery and offload a bigger stake in the main airport operator in addition to scrapping a €420 ($548) monthly subsidy to unemployed workers who have lost their rights to benefits.
US stocks also advanced, snapping a three-day losing streak on eurozone debt concerns after much better-than-expected US employment data lifted sentiment.
“All of the fear and loathing of the past few days has apparently fallen by the wayside this morning,” said Patrick O’Hare of Briefing.com.
The blue-chip Dow Jones Industrial Average was up 1.77 per cent at mid-day as the tech-heavy Nasdaq added 2.00 per cent.
Traders shifted their focus to the homeground after payrolls firm ADP said private sector employment rose in November at the fastest rate in three years, with payrolls expanding by 93,000.