European stock markets defied ominous US employment news and a fresh blow to Ireland’s credit worthiness yesterday, staging solid gains on positive German industry data.
Markets started the day well into positive territory on reports of new stimulus measures in Japan and the likelihood of similar moves by the US Federal Reserve.
The trend survived until the close of trade despite the gloomy news out of Ireland and the United States, with the London FTSE 100 index adding 0.81 per cent to finish at 5,681.39 points.
In Paris, the CAC 40 rose 0.88 per cent to 3,764.91 points while in Frankfurt the DAX also gained 0.88 per cent at 6,270.73 points.
Elsewhere, Milan added 0.28 per cent, Madrid 0.46 per cent, Amsterdam 0.58 per cent and the Swiss Market Index 0.59 per cent.
US stocks struggled in early deals after Tuesday’s sharp advance to a five-month high as an unexpected sharp drop in private employment revived concerns over the economic recovery.
The blue-chip Dow Jones Industrial Average was up just 0.09 per cent at mid-day, with the tech-heavy Nasdaq Composite down 0.68 per cent.
Payrolls firm ADP said private-sector employment fell by 39,000 in September. Most analysts had expected a gain of 18,000 jobs.
“The decline in private employment in September confirms a pause in the economic recovery already evident in other data,” the report said.
The figure also pointed to a possible disappointing report last Friday on the number of jobs created or lost in the United States in September.
Earlier in the day, the Fitch credit agency said it had cut its ratings on Ireland’s debts, citing the unexpectedly high cost of banking bailouts and an uncertain economic outlook.
The agency said it cut Ireland’s long-term foreign and local currency issuer default ratings to ‘A+’ from ‘AA-’, adding that the outlook was negative.
That news, however, had been expected by investors.
“We had been saying that this would happen,” noted Bertrand Lamielle of B*Capital, a unit of BNP Paribas bank.
“But in the meantime, the position of China (which has said it is ready to buy debt from Greece, another struggling eurozone member) could extend to other countries in difficulty. And that amounts to a supporting factor for the debts of countries with low ratings.”
Also shoring up markets Wednesday was a report that German factory orders shot up by a much better-than-expected 3.4 per cent in August, powered by healthy foreign demand, notably in the eurozone.
Eurozone partners accounted by far for the biggest share of international demand, “further evidence that the eurozone recovery is broadening,” according to ING senior economist Carsten Brzeski.
In Asia yesterday, Tokyo jumped 1.81 per cent as investor sentiment brightened on the additional monetary easing steps by the Bank of Japan.
Elsewhere Sydney gained 1.73 per cent, Hong Kong 1.07 per cent and Seoul 1.33 per cent.