European stocks rallied yesterday following better-than-expected US consumer spending figures and hopes US Federal Reserve Chairman Ben Bernanke will deliver if the economy needs another boost.
Traders said Mr Bernanke’s speech Friday suggested that if there is no immediate action in the offing, the Fed would step in if required to do so.
US consumer spending, which accounts typically for more than 60 per cent of all economic activity, rose 0.8 per cent in July, following a 0.1 per cent dip in June.
Trade was quiet due to a public holiday in London, Europe’s main market.
Frankfurt’s DAX closed 2.39 per cent higher at 5,670.07 points and the Paris CAC 40 climbed 2.16 per cent to 3,154.20 points.
In the US, the Dow Jones Industrial Average rose 1.60 percent at around 1630 GMT while the tech-rich Nasdaq Composite added 2.39 per cent.In Asian trade earlier yesterday, Tokyo gained 0.61 per cent, Hong Kong rose 1.44 per cent and Sydney was up 1.51 per cent.
The euro firmed against the dollar to $1.4508 from $1.4490 in New York on Friday.
The Greek market was the star performer, jumping 14.37 per cent after the announcement of a merger between Alpha Bank and Eurobank, with a sizable Qatari investment, the first bit of good news on the banks for some time.
“This is a first move towards a slightly stronger sector,” said Alex Koagne, a Natixis banking expert on Greece. “It will enable the launch of a banking consolidation in Greece.”
In Paris, financials also rose with Société Générale and Natixis up more than 3.0 per cent despite weekend comments by new International Monetary Fund chief Christine Lagarde that weaker European banks, heavily exposed to troubled eurozone debt, needed to recapitalise.
Mr Bernanke told the same Jackson Hole, Wyoming, meeting that politicians should do what was needed to help a struggling recovery.
He insisted that the US economy was still growing and that the Fed still had the tools necessary to sustain activity, without specifically saying what they were.
“Investors are counting on the next Federal Reserve meeting (on September 20) for new measures to help the economy if problems accumulate and that’s what carrying the markets,” Renaud Murail at Barclays Bourse in Paris said.
Oil prices rose meanwhile, helped by the US consumer spending data and with traders trying to see if there was any impact from Irene, the hurricane that swept up the US eastern coast over the weekend.
North Sea Brent for October delivery gained $1.20 to $112.56 and West Texas light sweet crude rose $1.95 to $87.32.