European stock markets closed firmer yesterday, with investors building positions cautiously as some of the worst fears over the eurozone debt crisis eased, dealers said.
They said the tone was positive overall, noting that US data continued to be largely positive – US weekly new jobless claims fell more-than-expected, providing more support for those who now favour equities over bonds.
Bonds have enjoyed sustained gains over the past two years as investors have poured money into the market on the view that a safe, fixed return was preferable as the global financial crisis took its toll on the economy.
There is a growing view, however, that if the US economic recovery can be kept on track, then stocks will offer better returns next year, with bonds having gone as far as they can unless there is a fresh disaster.
Stock markets in recent months have chalked up steady gains to take them back to levels last seen two years ago just before the financial crisis took hold.
In London, the FTSE 100 index of leading shares closed up 0.23 per cent at 5,807.96 points. In Paris, the CAC 40 gained 0.68 per cent to 3,858.05 points but in Frankfurt the DAX slipped 0.17 per cent at 6,964.16 points.
Elsewhere in Europe, Amsterdam jumped 2.66 per cent, Brussels put on 0.27 per cent, Madrid added 1.06 per cent, Milan rose 0.69 per cent and Swiss stocks gained 0.45 per cent.
In Asian trade earlier yesterday, Tokyo added 0.52 per cent to a seven-month high after an upward revision to Japanese third quarter growth.
Hong Kong added 0.34 per cent but the Shanghai Composite Index fell 1.32 per cent while Sydney gained 0.88 per cent.
“Markets are just tracking higher slowly but surely as finally investors are no longer focusing on the doom and gloom scenario within the eurozone but instead the year-end and the possibility that the FTSE could reach the 6,000 (points) level,” said Simon Denham, head of trading group Capital Spread.
“All the indices seem to be heading higher with Asian stocks putting in modest gains and yesterday US markets closed at their second highest level of the year.”
Xavier de Villepion of Global Equities in Paris said investors were looking to stocks now as they are believed to offer greater potential at this stage.
Dealers said a decision by the Bank of England to keep interest rates at a record low 0.50 per cent was as expected while a sharp Fitch ratings downgrade for Ireland attracted unusually little comment given the country’s travails.
In New York, shares were little changed, consolidating after the jobless claims data pointed to a modest recovery in the employment market.
The blue-chip Dow Jones Industrial Average was off 0.22 per cent while the tech-rich Nasdaq Composite gained 0.09 per cent at around 1700 GMT.
Initial claims for US unemployment benefits dropped 17,000 last week to 421,000 while the four-week moving average, which helps to smooth out volatility, was 427,500, down 4,000.
“The four-week initial claims average is the lowest since August 2008 and is a hopeful sign that employers are less pessimistic about the demand outlook as they slow the pace of their layoffs,” said Patrick O’Hare of Briefing.com.