European stock markets closed higher yesterday, with investors expecting the US Federal Reserve to announce more stimulus measures in an effort to keep the US economic recovery on track.
They said recent gains have been based on the view that the Fed would bite the bullet and act despite reservations about the possible impact on inflation, with some analysts warning about the dangers of rising prices.
The markets were also keeping a close eye on the US mid-term elections, which are expected to deal President Barack Obama’s Democratic Party substantial losses and complicate the policy mix in Washington.
Strong corporate results, especially in Britain, provided support as did a solid opening on Wall Street.
In London, the FTSE 100 index of leading shares closed up 1.10 per cent at 5,757.43 points. In Paris, the CAC 40 gained 0.64 per cent to 3,865.72 points and in Frankfurt the DAX added 0.75 per cent at 6,654.31 points.
“Stronger than expected earnings from (energy) firms BP and BG Group have lifted the FTSE 100 ... while the weaker dollar has also pushed key mining stocks into positive territory,” said Joshua Raymond, an analyst with City Index.
Mr Raymond said the market would be keeping close watch on the Fed meeting, which closes today.
Nick Serff of City Index noted that European markets came off their highs as investors adjusted position ahead of the Fed and US election outcomes but still managed solid gains overall.
Republican gains “could potentially please Wall Street but make the Obama administration’s job a little tougher,” Mr Serff said, adding that the Fed’s stance will likely prove the more immediate concern.
BP rose 1.80 per cent after it posted a third quarter net profit of $1.79 billion (€1.28 billion) following a loss of $16.9 billion in the second despite ramping up its estimate for the cost of the Gulf of Mexico oil spill by almost a quarter to $40 billion.
BG Group meanwhile gained 3.43 per cent after reporting a 7.0 per cent rise in third quarter net profit, aided by higher commodity prices, and also raising its resources estimate for Brazil.
In New York, the blue-chip Dow Jones Industrial Average was up 0.73 per cent at around 1700 GMT while the tech-rich Nasdaq composite index gained 0.96 per cent.
Dealers said investors were looking to the Fed to give the lead by announcing today that it would resume large-scale asset purchases, known as Quantitative Easing, in a bid to boost the weak economic recovery.
By that time, the election results will also be known although few surprises are expected on that count.
Elsewhere in Europe, Amsterdam rose 0.79 per cent, Brussels was up 0.31 per cent, Madrid gained 1.06 per cent, Milan put on 1.01 per cent and Swiss stocks added 0.57 per cent.
In Asian trade earlier yesterday, Tokyo, Sydney and Hong Kong all closed flat while Shanghai was down 0.28 per cent.