Thursday, 19 January 2012

European stocks, euro rise on upbeat bond sales

LONDON — European stock markets closed higher and the euro climbed against the dollar Thursday following positive government bond sales by France and Spain despite downgrades for the major eurozone economies.

Sentiment was also boosted by encouraging US economic data and International Monetary Fund plans to stock its coffers for crisis fighting.

In London, the FTSE 100 index of leading shares closed up 0.68 percent at 5,741.15 points. In Paris, the CAC-40 index jumped 1.96 percent to 3,328.94 points and in Frankfurt the DAX 30 rose 0.97 percent to 6,416.26 points.

Madrid jumped 2.17 percent and Milan gained 2.45 percent.

Italy was also hit Friday by a Standard and Poor's two-notch downgrade.

In Athens, the bourse gained 2.94 percent, having been up more than 4.0 percent earlier on growing optimism that the government will finally reach a crucial debt deal with private creditors.

"If the Greek situation is resolved in time, chances rise that the crisis will remain under control for longer, even without a decisive and more direct intervention" by the European Central Bank, Berenberg Bank senior economist Christian Schulz said in a research note.

Athens faces a mid-March deadline to obtain new financing if it is not to become the first developed country in 60 years to declare a debt default.

In New York, the Dow Jones Industrial Average was up 0.25 percent while the broad-based S&P 500 added 0.80 percent at around 1650 GMT.

Wall Street equities were "buoyed by some upbeat US economic and earnings news while continued success in debt auctions across the pond is also lending support to sentiment," Charles Schwab analysts said.

New claims for US unemployment benefits fell sharply last week to the lowest level in more than three years, official data showed, confirming recent signs of healing in the labour market.

Earnings news was also positive.

"The latest figures from ... Bank of America and Morgan Stanley were well-received, as was eBay's turn in the earnings limelight," said Andrea Kramer at Schaeffer's Investment Research.

The euro meanwhile rallied to $1.2925 from $1.2862 in New York late Wednesday after France and Spain both raised funds at much lower rates as investors seemed to largely discount Friday's Standard and Poor's eurozone ratings downgrades.

"Strong and healthy demand (for French and Spanish debt) demonstrated how undisturbed the markets were by the recent S&P downgrade that deprived France of its triple-A rating," Gekko Global Markets trader Anita Paluch told AFP.

"The biggest news ... is that the French and Spanish bond auctions attracted strong demand and yields fell, which is exactly what the EU wants to see," said Kathleen Brooks, an analyst at traders

The successful bond sales came a day after the IMF said it planned to add $500 billion to its war chest, a move understood to be aimed at stalling fallout from the eurozone crisis and preventing a global recession.

Meanwhile, it emerged that the IMF had given approval for talks on new rescue loans to Greece.

"After a waiting period of several weeks, the green light has been given for the country to submit to the IMF a request to begin procedures for the new programme," Greek Finance Minister Evangelos Venizelos told parliament.
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