European stock markets closed sharply higher yesterday as investors hoped EU leaders will shortly come up with a concrete solution to the eurozone debt crisis to end months of agony and uncertainty.
The announcement on Thursday that EU leaders would meet next Wednesday after tomorrow’s key summit in Brussels dampened sentiment in early trade but by the close yesterday, the optimists were in the majority, betting on solid if very short-term gains.
Dealers said that divisions – basically between France and Germany – over how to proceed were largely out in the open now, meaning that they might stand a better chance of getting resolved.
By the same token, another failure by European leaders to strike an agreement and stick to it would likely go down very badly, they said.
In London, the FTSE-100 index of top companies closed up 1.93 per cent to 5,488.65 points. In Paris, the CAC-40 jumped 2.83 per cent to 3,171.34 points and in Frankfurt the DAX-30 soared 3.55 per cent to 5,970.96 points.
Elsewhere in Europe, there were similar substantial gains with Madrid up 2.84 per cent and Milan adding 2.80 per cent.
The European single currency bounced to $1.3889 from $1.3772 in New York late Thursday. The dollar eased to 76.14 yen from 76.78 yen.
In New York, stocks posted strong opening gains and kept them, driven by the same hopes for a eurozone debt accord and mostly positive company quarterly earnings.
The blue-chip Dow Jones Industrial Average was up 1.99 per cent at around 1600 GMT, with the broader S&P 500 up 1.64 per cent as the tech-heavy Nasdaq Composite gained 1.54 per cent.
“The major averages all hold gains in excess of one per cent as markets see a strong opening surge in anticipation that this weekend’s European Union summit will provide some answers as to how Europe plans to combat its debt crisis,” said analysts at Briefing.com.
In Paris, Renaud Murail, a dealer at Barclays Bourse, said European leaders have no other choice but to come up with an agreement, at the latest at Wednesday’s summit meeting.
Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, said “it seems that the meeting on Sunday of euro leaders is now going to be used to assess the rescue package, some of which has already been trailed.
“In an effort to buy some more time, however, it appears that another meeting, scheduled for Wednesday, will be the one from which the decision is announced,” Mr Hunter said.
“Ahead of the Wednesday meet, the market will continue to attempt to double guess the outcome as details trickle through. Sentiment is therefore likely to remain fragile,” he added.
European finance ministers were meeting yesterday to try to nail down debt funding for bailed-out Greece, a restructuring of Greek debt and help for the banks who will inevitably lose out as a result.