Wednesday, 14 August 2013 20:03
LONDON: European stock markets mostly rose on Wednesday after official data showed that the eurozone had finally escaped from a record 18-month recession.
In afternoon trading, Frankfurt's DAX 30 had advanced 0.23 percent to 8,435.52 points, while the CAC 40 in Paris had added 0.71 percent to stand at 4,121.68 compared with Monday's closing values.
London's FTSE 100 index was flat, however, at 6,612.05 points, and sterling rallied as investors bet on a rise to British interest rates sooner than expected.
The eurozone climbed out of recession with surprisingly strong growth of 0.3 percent in the second quarter led by Germany and France, the European Union said on Wednesday.
Andrew Kenningham, a senior economist at Capital Economics in London, said that "the end of the eurozone recession and the strengthening of the US recovery suggest that global growth will continue, albeit at a relatively modest pace by historical standards."
Behind the headline gains, however, the third- and fourth-largest eurozone economies of Italy and Spain pulled up short, with their economies shrinking 0.2 percent and 0.1 percent, respectively.
Traders sent the euro sliding to $1.3255 compared with $1.3262 late in New York on Tuesday. The dollar was flat at 98.21 yen from 98.22 yen.
Sterling jumped to $1.5511 from $1.5444 and was at 85.45 pence against the euro from 85.86 pence on Tuesday.
Britain's unemployment rate remains at 7.8 percent, significantly above a level that could trigger the Bank of England to raise its main interest rate, official data showed on Wednesday.
However the minutes of the Bank of England's last policy meeting were released, showing there was some division about its new policy of providing forward guidance about interest rates, which investors looked at an indication the rates could be hiked sooner than previously expected.
Last week, the Bank of England announced a major policy shift, as new head Mark Carney provided clear guidance on when the BoE could be expected to raise record-low borrowing costs.
The BoE said that it did not plan to raise its key interest rate from its current level of 0.5 percent until Britain's unemployment rate falls to seven percent providing markets with so-called forward guidance as used by the US Federal Reserve.
But the minutes of the meeting showed that only eight of the BoE's nine Monetary Policy Committee members, including Carney, voted in favour of the guidance.
The BoE release "was good news for the British pound which jumped higher as investors hoped that the flicker of resistance to Carney's forward guidance will increase in coming months, possibly leading to an earlier-than-expected rise in interest rates" said analyst Beauchamp.
Asian stock markets closed mixed on Wednesday following gains on Wall Street.
On Wall Street, US stocks opened flat as improving economic conditions in Europe were offset by a US inflation report that pointed to tepid growth.
Five minutes into trade, the Dow Jones Industrial Average lost 0.15 percent, while the broad-based S&P 500 and the tech-rich Nasdaq Composite were both essentially flat.
On the London Bullion Market, the price of gold dropped to $1,323.25 an ounce from $1,328.50 on Tuesday as a stronger dollar, making the precious metal more expensive for holders of rival currencies, dented demand according to traders.
Markets were keeping a close watch also over Egypt, scene on Wednesday of violent unrest.
Security forces moved in on two huge Cairo protest camps set up by supporters of Egypt's ousted president Mohamed Mursi, launching a crackdown that quickly turned into a bloodbath with dozens dead.Copyright AFP (Agence France-Presse), 2013