European stocks closed higher yesterday after recent sustained losses as a series of data reassured investors fearful that the global economy was slowing badly.
London’s benchmark FTSE 100 index of top shares up 0.51 per cent at 5,803.13 points. Frankfurt’s DAX rose 1.69 per cent to 7,204.79 points, finishing above the 7,200 mark for the first time since June 1, and the CAC 40 in Paris gained 1.50 per cent to 3,864.58 points.
“The FTSE 100 traded back around the 5,800 level... supported by heavyweight mining shares, whilst UK inflation held steady at 4.5 per cent, applying less pressure on the Bank of England to raise interest rates,” said Joshua Raymond, chief market strategist at City Index traders.
In China, meanwhile, inflation hit its highest level in nearly three years in May, prompting Beijing to further restrict bank lending to stem a flood of capital.
China’s consumer price index jumped to 5.5 per cent year-on-year in May – far above the official annual target of 4.0 per cent – as food costs soared on power shortages and crippling droughts in some areas.
But while the data highlighted concerns over rising costs, it met forecasts and sent Asian stock markets higher on the view that the world’s second-biggest economy was still in good health despite Beijing’s efforts to slow growth.
“Traders can be a fickle bunch and today’s (Monday) price action reminds us of this fact,” said Mr Raymond.
“Last week they sold off their holdings in mining stocks due to a three percent fall in copper demand by China.
“Now with data ... showing that Chinese inflation rose to 5.5 per cent... and industrial production slowed less sharply than feared, traders have been happy to buy back into the miners on hopes that the data reaffirms near term strength in copper demand,” he added.
Bertrand Lamielle of B-Capital, a BNP Paribas subsidiary in Paris, cautioned on reading too much into yesterday’s gains.
“One swallow does not make a Spring,” he said pointing out that a European Union summit due to find a solution to the Greek debt crisis was still 10 days away.
US stocks also gained sharply yesterday, buoyed by the inflation news from China and favourable economic data from the US.
The Dow Jones Industrial Average was up 1.13 per cent at 4.30 GMT, the broader S&P 500 index gained 1.33 per cent and the tech-heavy Nasdaq Composite was up 1.54 per cent at 2,680.46.
“Today’s data from abroad and at home is consistent with the soft patch view as opposed to the rumblings of a global economy moving toward another recession,” said Patrick O’Hare of Briefing.com.
Asian stocks were higher on similar relief that Chinese inflation met forecasts while Tokyo was also boosted by a central bank plan to extend a credit line to help Japan’s post-quake economy.
Tokyo jumped 1.05 per cent, Shanghai rose 1.10 per cent and Sydney climbed 0.50 per cent while Hong Kong was flat.