European stock markets posted more solid gains yesterday as Germany and France backed up a staunch defence of the euro by ECB chief Mario Draghi and the US reported better than expected growth in the second quarter.
London’s benchmark FTSE 100 index rose 0.97 per cent to close at 5,627.21 points as the focus in the British capital turned towards the start of the Olympic Games.
The Paris CAC 40 jumped by 2.28 per cent to 3,280.19 points, while Frankfurt’s DAX 30 was 1.62 per cent higher at 6,689.40.
In Madrid the Ibex 35 index surged by 3.91 per cent, while in Milan the FTSE Mib was up 2.93 per cent.
In foreign exchange deals, the euro traded for $1.2369, up from $1.2280 in New York late Thursday, after reaching a three-week high of $1.2377 in intraday deals.
Equities had already surged on Thursday after European Central Bank chief Draghi pledged unconditional support for the euro, reassuring investors ahead of the bank’s interest rate meeting in Frankfurt next Thursday.
And if markets began to have second thoughts about Mr Draghi’s comments, the message was reinforced Friday by German Chancellor Angela Merkel and French President Francois Hollande who vowed in a joint statement to do “everything to protect the eurozone” after telephone talks.
The French daily Le Monde reported that the ECB was preparing concerted action with eurozone governments “to save the euro.”
ETX Capital analyst Ishaq Siddiqi said that “European markets finally found some impetus to push higher toward the latter half the session today.”
He added that the the euro had regained ground against the dollar and that sovereign bond yields had eased further “on growing expectations that the ECB will finally comply with the markets’ wish for QE,” or quantitative easing.
If so, the central bank would adopt policies used already by the US Federal Reserve and Bank of England to encourage economic activity by pumping cash into the financial system.
In New York, US stocks advanced in midday trading on second-quarter economic growth data and encouraging earnings from Dow member Merck.
The Dow Jones Industrial Average was up 0.82 per cent at 12,993.69 while the S&P 500-stock climbed 1.11 per cent to 1,375.14 and the tech-rich Nasdaq rose 1.29 per cent to 2,930.68.
Before the market opened, the US Commerce Department reported that the world’s largest economy slowed to an annual growth of 1.5 per cent in the April-June period.
“That is lousy, but expectations had dropped so low that the spin is coming out as ‘not too bad,’” said Dick Green at Briefing.com.
Asian stock markets closed higher earlier and the euro held on to strong gains won overnight.
Hong Kong shares rallied 2.02 per cent, Tokyo climbed 1.46 per cent, Seoul soared 2.62 per cent and Sydney finished 1.50 per cent higher.