European stocks gained yesterday, with hints of further stimulus in the United States offsetting pressures from the eurozone debt crisis, while gold soared to a record high level.
Upbeat Chinese growth data sent share prices rising from the outset, erasing anticipation that a ratings downgrade of Irish 10-year bonds to junk status would hasten more falls.
Divided European leaders were not a contributing factor to market respite, with France and Germany disagreeing about calling an emergency summit despite demands for rapid action to fight the spreading eurozone debt crisis.
At closing, London’s FTSE 100 index showed a gain of 0.64 per cent to 5,906.43 points, after gains across Asia after two days of turmoil on global markets because of contagion from the eurozone debt crisis. Frankfurt’s DAX 30 gained 1.31 per cent to 7,267.87 points and in Paris the CAC 40 won 0.51 per cent to 3,793.27.
The Milan exchange rallied 1.79 per cent, and Madrid jumped 0.66 per cent after suffering major losses the previous day.
Gold rocketed to $1,579.00 an ounce on the London Bullion Market above the record high of $1,577.57 set on May 1. In foreign exchange deals, the European single currency climbed to $1.4172 in late trading, one day after plunging to a four-month low point of $1.3974.
“The euro’s nose dive came to a temporary halt yesterday and now the currency is struggling with the 1.40 mark against USD. However, the situation remains fragile as Moody’s downgrade of Ireland to junk status demonstrates,” Commerzbank said.
The euro gains were on the back of US Fed chairman Ben Bernanke telling Congress that more stimulus to a sluggish US economy was feasible, including a fresh round of quantitive easing whose effectiveness – critics say – has yet to be proven.
Jobs and consumer data in the United States have disappointed in recent weeks, dampening hopes for a strong turnaround in 2011 and with inflation under control, Mr Bernanke said jumpstarting the economy remained a priority.
“Bernanke’s comments to Congress drove the US dollar lower as he indicated that further QE could well be around the corner,” CMC Markets analyst, Michael Hewson said.