LONDON: European stock markets rebounded strongly Thursday following gains on Asian and US indices after the Federal Reserve suggested a likely US interest rate increase in December on growing economic confidence.
Heightened security fears in the wake of the Paris terror attacks and caution ahead of an update from the Federal Reserve had pushed European markets lower on Wednesday.
But they rebounded first on Wall Street on Wednesday and then across Asia and Europe on Thursday after the release of minutes from the US central bank.
By midday, Frankfurt's DAX 30 stocks index was up 1.6 percent and the Paris CAC 40 won 0.8 percent compared with Wednesday's close.
Outside the eurozone, London's benchmark FTSE 100 index was up 1.4 percent.
"Clearly the removal of the uncertainty around the US rate hike is seen as being far more preferable to investors than keeping them at record lows for a little longer," said Craig Erlam, senior market analyst at Oanda trading group.
"Everyone may not be in agreement that rates should rise but there is a general acceptance now that it's happening and the market seems capable of dealing with it.
Minutes from the Fed's October 27-28 monetary policy meeting showed most officials expect a rate hike in December and have moved past worries about slowing global growth that had prevented a hike in September.
Fed chief Janet Yellen had said earlier in the year she expected an increase by 2016 but a hike was put off several times during the summer as world markets were hammered by worries about China and the global outlook.
But a string of figures out of Washington recently -- particularly on jobs growth and price rises -- coupled with an uptick on equities markets, has reignited confidence at the Fed to lift rates for the first time in nine years.
"In reality, the economy is performing more than well enough to cope with a small rate increase from the current record low levels and it's good to see that the market is moving on from the hysteria surrounding it. The path of rate hikes is far more important than the first," Erlam added.
Also, a number of Fed policymakers were concerned that, having built up expectations of a hike for so long, not moving would send a disturbing message and erode the bank's credibility.
Delaying a rise "could increase uncertainty in financial markets and unduly magnify the perceived importance of the beginning of the policy normalisation process," the minutes said.
The outlook for a US rate hike boosted the dollar, although the euro recovered to $1.0688 after hitting a seven-month low at $1.0617 on Wednesday.
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