European stocks rallied yesterday and the euro rose against the dollar as Chinese data and upbeat US company results overshadowed fears over the stubborn eurozone debt crisis, dealers said.
Investor sentiment was boosted over fresh speculation of more monetary easing from Beijing and on surprise talk from ratings agency Fitch that France was not under the threat of a ratings downgrade in 2012.
European markets closed sharply higher with London’s FTSE index of leading companies up 1.50 per cent at 5,696.7 points.
In Paris, the CAC-40 index gained 2.66 per cent at 3,210.79 points and in Frankfurt the DAX 30 added 2.42 per cent to 6,162.98 points.
In Milan, the FTSE Mib surged 3.08 per cent to 14,845 points led by a recovery in the banks, including UniCredit, which had slumped sharply in the past few sessions.
Elsewhere in Europe, Madrid jumped by 2.34 per cent, Brussels by 2.17 per cent, Amsterdam by 1.20 per cent, and Zurich by 1.06 per cent. Lisbon slipped by 0.25 per cent.
The euro meanwhile advanced to $1.2782 from $1.2763 in New York late Monday, when it struck a 16-month low at $1.2666.
“The mood relaxed this Tuesday (yesterday), American data is still encouraging and the reassuring talk from Fitch (regarding France) sustained the markets,” Arnaud de Champvallier, director at Turgot Asset Management in Paris, said.
US stocks also shot higher in midday trade with the Dow Jones Industrial Average up 0.74 per cent to 12,484.87 points, the tech-rich Nasdaq Composite adding 1.06 per cent to 2,704.93 points and the broader S&P 500 gaining 0.98 per cent to 1,293 points after strong earnings by Alcoa.
“Traders are celebrating the aluminium giant’s stronger-than-expected top-line results, as well as its forecast for growing global demand,” said Andrea Kramer at Schaeffer’s Investment Research.
US aluminium giant Alcoa announced overnight that full-year profit more than doubled in 2011 to $611 million and delivered an upbeat demand outlook but also posted a fourth-quarter loss of $191 million on declining revenues.
China’s trade surplus shrank in 2011 as import and export growth slowed sharply, official data showed yesterday, after domestic tightening measures and global economic turmoil hit consumption.
The figures add to mounting evidence the economy is slowing and ratchets up pressure on Beijing to further loosen policy to prevent the world’s second-largest economy from suffering a painful hard landing.
“Over in China, we’re seeing a similar development with regards to economic data as happened in the US last autumn – namely that bad data has a positive effect as it raises hopes of looser monetary policy,” said IG Index analyst David Jones.
“Today’s weaker trade data from the Asian giant spurred some to hope that Beijing will cut rates to boost growth, breathing new life into the dynamo economy of the east.”
In Asian trade, Shanghai’s stock market soared 2.69 per cent and Hong Kong closed 0.73 per cent stronger. Tokyo gained 0.38 per cent.
Franco-American ratings agency Fitch said yesterday it does not plan to downgrade France’s top triple-A credit rating in 2012 unless the country suffers major economic shocks.
Separately Fitch said Italy was the most worrying of the embattled eurozone countries and could see its credit rating cut this month.
The agency warned that eurozone countries have to raise two trillion euros in 2012 with more than half of that accounted for by members of the single currency bloc – such as Spain, Italy, Belgium and Ireland – currently most at risk of a downgrade by Fitch.