Europe’s main stock markets closed higher yesterday, with Paris’ CAC 40 advancing 0.44 per cent to 3,664.59 points, its highest level this year.
Investors are still optimistic that a deal will be done
London’s FTSE 100 index of leading companies rose 0.43 per cent to 5,961.59 points, while Frankfurt’s DAX 30 added 0.19 per cent to 7,668.50 points.
European equities climbed yesterday in a “Santa” rally that was driven by hopes of a breakthrough deal to avoid the US “fiscal cliff,” and on news of rebounding German business confidence, dealers said.
In afternoon deals, London’s benchmark FTSE 100 index of leading shares rose 0.65 per cent to 5,974.77 points, Frankfurt’s DAX 30 index won 0.33 per cent to 7,679.06 points and the Paris CAC 40 climbed 0.49 per cent to 3,666.53 points.
Milan’s FTSE Mib index gained 1.19 per cent to 16,347.08 points and Madrid’s IBEX 35 rallied 1.76 per cent to 8,312.3 points. Shares in Athens, a low-volume market, shot up by 4.07 per cent after ratings agency Standard and Poor’s lifted the country out of selective default on Monday.
Gold prices rose to $1,674.50 an ounce on the London Bullion Market, from $1,672.75 Tuesday.
“Santa has returned to the markets, bringing some much needed cheer before the Christmas break,” said Ishaq Siddiqi, analyst at ETX Capital trading group.
“Traders are feeling risky as such, picking up euros, stocks oil and even gold but dumping core government bonds.
“US budget talks are progressing in the right direction, albeit still not as fast as markets would like. Republicans have a back-up plan in case talks collapse with Democrats and the US economy drives off the cliff,” he added.
The main focus remains on the United States, where lawmakers are holding talks to avert the huge tax hikes and deep spending cuts slated to come into effect in two weeks.
Most economists expect the package to tip the US economy into recession if a new deal – with less swingeing measures – is not agreed in time.
However, there is growing confidence that progress is being made in the negotiations, with top Republican lawmaker John Boehner saying he is willing to see taxes rise for people on more than $1.0 million – rather than his previous position of no rises at all.
President Barack Obama has also said he is willing to see rises for people on more than $400,000, rather than the $250,000 he previously wanted.
“Investors are still optimistic that a deal will be done following positive talks earlier in the week,” said analyst Craig Erlam at trading group Alpari.
“We are likely to see risk assets continue to rally now for the rest of the year, unless talks collapse, which at this stage is unlikely.”
Investor sentiment was boosted also by data showing German business confidence continued to climb in December, amid growing faith that the eurozone will manage to beat its crippling debt crisis.