European stock markets closed higher yesterday, boosted by hopes for progress in both the eurozone and US debt crises while solid company results bolstered investor confidence.
Dealers said sharp gains overnight on Wall Street after US President Barack Obama welcomed a major bi-partisan deal on tackling the public deficit drove Asia higher and set up Europe to build on Tuesday’s technical rebound.
A more positive lead from Germany on today’s crunch eurozone debt summit in Brussels also helped but the underlying tone remained cautious given the failure of past meetings to deliver a lasting solution.
French President Nicolas Sarkozy and German Chancellor Angela Merkel also met late yesterday with both sides stressing their commitment to stabilising the eurozone.
In London, the benchmark FTSE 100 index of top shares closed up 1.10 per cent at 5,853.82 points. In Frankfurt, the DAX added 0.40 percent to 7,221.36 points and in Paris the CAC 40 rose 1.61 per cent to 3,754.60 points. Madrid and Milan each jumped more than three percent, albeit after very sharp recent losses, as investors bet that Italy and Spain will beat the eurozone debt crisis trap which has already dragged down Greece, Ireland and Portugal.
Banks led the rally, having suffered badly in recent weeks, with many posting gains of four to five percent and even more in some cases. After Tuesday’s substantial gains, markets rose further “as Obama shed light on a possible deal with Republicans to deal with the US deficit”, Spreadex trader Simon Furlong said.
“Worries over Europe are unsurprisingly still a persistent burden on the markets,” he added.
In Paris, Yves Marcais at Global Equities said many investors were betting that there would be a eurozone debt deal and a second Greek bailout agreed at the summit after a more positive tone emerged from Berlin. “It either works or it explodes,” Mr Marcais said of the summit. In New York, share prices slipped in early trade, as was to be expected after a jump of more than 1.6 per cent on Tuesday on the Obama news lead and a series of very strong company results, notably from Apple.
The blue-chip Dow Jones Industrial Average was down 0.15 per cent at around 1625 GMT while the tech-heavy Nasdaq Composite lost 0.58 per cent.
“A round of upbeat earnings has bolstered the bulls’ spirits,” said Sarah Wasserman, an analyst with Schaeffer’s Investment Research.
In Asian trade, Tokyo rose 1.17 per cent, Hong Kong gained 0.46 per cent and Sydney added 1.83 per cent but Shanghai slipped 0.10 per cent.