LONDON: European stock markets closed higher on Tuesday, extending gains to take them back to levels last seen before the global crash in late 2008 as investors bet on a sustained advance this year.
Dealers said news of another Chinese interest rate hike to tame rising inflation in the booming economy hit early trade but shares then steadily picked up on the view that Beijing cannot afford to slow growth too sharply.
They said sentiment has steadily improved recently on the view that the US economy is coming out of the doldrums and that the eurozone debt crisis will be resolved, with strong corporate results bolstering the more positive tone.
The euro meanwhile bounced back against the dollar, with the markets pricing in the prospect of higher eurozone interest rates to counter inflation later this year.
News of a fall in German industrial production in December had little impact, with the downturn attributed more to bad weather than any change in the economy's strong fundamentals.
In London, the FTSE 100 index of leading shares closed up 0.67 percent to 6,091.33 points. In Paris, the CAC 40 added 0.43 percent to 4,108.27 points and in Frankfurt the DAX gained 0.54 percent to 7,323.24 points.
In foreign exchange deals, the euro climbed to $1.3683 from $1.3581 in New York late Monday. The dollar fell to 81.94 yen from 82.32 yen.
China on Tuesday raised interest rates for the third time in four months as the authorities ramped up efforts to tame inflation amid fears it could trigger social unrest.
"Today's interest rate hike in China, on the eve of China's return to work after the New Year break, was widely expected," said Capital Economics analyst Mark Williams.
"The announcement may cause jitters about the impact tightening will have on Chinese growth but these should not be overplayed."
The rate hike hit miners hard given their role in supplying China's massive market but the concern should not be overdone, dealers said.
In Paris, the market was back at September 2008 levels and at above 4,100 points looked promising.
"The market is holding well ... which proves that this is not a flash in a pan and that what we are seeing is a return of investors to European stocks, including French ones," said Arnaud de Champvallier of Turgot Asset Management.
"The return of confidence is particular notable in the banks which suffered most in 2010," he added.
In New York, the blue-chip Dow Jones Industrial Average was up 0.31 percent at around 1700 GMT while the tech-rich Nasdaq Composite added 0.11 percent, with the main talking point being China's interest rate hike, dealers said.
"Not surprisingly, there is an air of hesitation in the wake of the move as participants consider the potential implications for global growth in general and end-demand out of China specifically," said Patrick O'Hare at Briefing.com.
Elsewhere in Europe, Amsterdam put on 0.34 percent, Brussels edged up 0.09 percent, Madrid added 0.39 percent and Swiss stocks were up 0.42 percent but Milan fell 0.26 percent.
In Asian trade earlier Tuesday, Tokyo added 0.41 percent and Sydney put on 0.45 percent but Hong Kong slipped 0.29 percent.
Comments
Comments are closed.