European stocks and the euro rallied yesterday – the start of the fourth quarter – as traders tracked Spanish debt strains and the revival of a merger bid by commodities sector giants Xstrata and Glencore.
In London at close, the FTSE 100 index of top companies rose by 1.37 per cent to 5,820.45 points, while in Frankfurt, the DAX 30 gained 1.53 per cent to 7,326.73 points and in Paris the CAC 40 jumped by 2.39 per cent to 3,434.98 points. Madrid’s IBEX 35 index advanced 0.98 per cent to 7,784.10 points.
In the US on Wall Street, in midday trading, the Dow Jones Industrial Average was up 1.11 per cent, the S&P 500-stock index had added 0.81 per cent and the tech-rich Nasdaq Composite had gained 0.39 per cent.
Briefing.com’s Patrick O’Hare said the rise was driven by manufacturing surveys in China, India, Germany, France and Britain that although not buoyant, were not as bad as they could have been. “The catalyst is a dubious one in our estimation, because the manufacturing data are not strong,” he said.
“In fact, manufacturing surveys out of China, Germany, France, and the UK were all below 50.0, which is the dividing line between expansion and contraction.”
In foreign exchange trade, the euro climbed to $1.2911 from $1.2856 late in New York on Friday. Gold prices rose to $1,787 an ounce on the London Bullion Market from $1,776 an ounce on Friday.
“Disappointing manufacturing data from China had been seen as likely to weigh on sentiment at the start of the week but – at least for the time being – there’s a degree of optimism in play,” said Fawad Razaqzada, a strategist at traders GFT Markets.
Sentiment was lifted in part by the announcement on yesterday that Swiss mining group Xstrata and commodities giant Glencore had agreed new terms on a tie-up to create a company worth about £53 billion (€86 billion).
The revised terms mean that Xstrata shareholders would receive 3.05 Glencore shares, which the companies said represents a 17.6-per cent premium on the price of the miner’s stock before the merger bid was announced in February.
“Steps to create the world’s biggest metals and commodities trader have almost been completed this morning, with it being released to the market that Xstrata recommends to its owners an all-share merger with Glencore,” said Spreadex trader David White.
In response, Xstrata’s shares surged 3.06 per cent in to 986.8 pence and Glencore won 0.58 per cent to 345 pence on the London market.
On the secondary debt market, rates on Spanish 10-year debt fell to 5.877 per cent from 5.938 per cent on Friday.