European stock markets closed sharply higher yesterday, driven by very strong results for the banks and better-than-expected US data after disappointing growth figures last week, dealers said.
They said a series of forecast-beating results led by Europe’s biggest bank HSBC were just the tonic after Friday’s lower-than-expected US second quarter growth report hit confidence amid growing concerns about the recovery.
Better news Monday was of only slightly weaker US manufacturing, suggesting the US economy may be slowing but it is not at risk – not yet at least – of slipping back into recession.
In London, the FTSE 100 index of leading shares jumped 2.65 per cent to 5,397.11 points. In Paris, the CAC 40 put on 2.99 per cent to 3,752.03 points and in Frankfurt the DAX gained 2.34 per cent to 6,292.13 points.
“It’s been a stellar start to the week’s trading after US markets reversed their losses late on Friday and Asian markets got proceedings off to a good start,” said Simon Denham, analyst at trading firm Capital Spreads.
“In Europe and the UK... corporate releases have once again revealed good numbers and it’s the banks that are leading the way,” Mr Denham said
HSBC shot up 5.26 per cent after saying its first half net profit more than doubled to $6.76 billion (€5.17 billion) as it slashed bad debt in the United States and increased earnings in key emerging markets.
In Paris, BNP Paribas jumped 5.27 per cent as the French bank reported an unexpectedly strong second-quarter net profit of €2.1 billion ($2.7 billion), up 31 per cent and way above analysts’ forecasts.
Banks elsewhere were also up sharply while in Germany, the core industrials attracted strong interest as confidence in the economic outlook rose. Volkswagen gained 3.92 per cent, Siemens was up 3.78 per cent and Bayer put on 3.80 per cent.
The European markets got another boost in afternoon trade as Wall Street took off, with the blue-chip Dow Jones Industrial Average soaring 1.89 per cent at around 1600 GMT with the tech-rich Nasdaq Composite up 1.83 per cent.