European stocks rise as Japan pledges help

Europe’s main stock markets posted strong gains yesterday after Japan said it would buy European bonds to help finance a bailout for crisis-hit Ireland but concerns lingered over debt-laden Portugal.

London’s FTSE 100 index of leading shares closed up 0.97 per cent at 6,014.03 points, while in Paris the CAC 40 index climbed 1.58 per cent to 3,861.92 points and in Frankfurt the DAX rose 1.23 per cent to 6,941.57 points.

Traders were comforted after Japan said it would buy bonds from a eurozone rescue fund to help finance Ireland’s bailout and support the debt-hit bloc, following similar overtures from China amid fears of a spreading crisis.

Finance minister Yoshihiko Noda said Japan should help boost confidence in the bonds issued by a European bailout mechanism as concerns grow for nations such as Portugal.

In pledging such purchases, Japan is joining China, which has already expressed readiness to assist European economies seen as most exposed to a debt crisis by pledging to buy bonds directly from Spain, Greece and Portugal.

The news helped boost stocks across Europe, with Portugal soaring 2.40 per cent on the eve of Lisbon making its first long-term bond sale of the year in what could be a crunch test of its ability to continue raising fresh funds at affordable rates.

Brussels gained 0.96 per cent, Amsterdam rose 1.15 per cent, Swiss stocks climbed 1.37 per cent, Milan added 1.40 per cent and Madrid jumped 1.53 per cent.

However, investors remain on alert over a possible international bailout of Portugal, for which borrowing rates remain close to “unsustainable” levels, according to analysts.

Lisbon was adamant it does not expect to seek external help to cope with its debt and “is doing everything to avert such an eventuality,” Finance Minister Fernando Teixeira dos Santos insisted yesterday.

But concerns are mounting that the nation could follow debt-wracked Athens and Dublin, which both sought multi-billion-euro bailouts last year from the European Union and the International Monetary Fund.

Portugal today makes its first foray into the bond markets since Ireland was forced to seek an EU-IMF bailout in November, with the planned sale of €7million to €1.25 billion worth of long-term debt.

On Wall Street, US stocks were also making moderate gains after a positive start to the quarterly earnings season and easing eurozone debt fears.

The Dow Jones Industrial Average was up 0.42 per cent to 11,686.68 at around 1700 GMT.

The broad-market S&P 500 index rose 0.51 per cent to 1,276.26 and the tech-rich Nasdaq climbed 0.40 per cent to 2,718.70.

“With Japan pledging to buy European debt, and Alcoa Inc. posting a solid quarterly earnings report, tensions on Wall Street have eased considerably,” said Joseph Hargett at Schaeffer’s Investment Research.

Aluminum giant Alcoa kicked off earnings season after the market closed Monday with strong fourth-quarter earnings.

The Dow component reported a swing into profit of $258 million, from a loss of $277 million a year earlier, beating expectations.

Alcoa shares fell 1.76 per cent yesterday morning to $16.20, after gaining more than 25 per cent since the end of last November.

Asian shares were mixed yesterday.