European shares rally on inflation data

LONDON: European stocks rallied on Tuesday as global inflation data lacked any surprises, in turn boosting commodities.

London's benchmark FTSE 100 index of top shares rose 0.45 percent to 5,799.85 points approaching midday trade.

Frankfurt's DAX 30 jumped 1.59 percent to 7,197.50 points and in Paris the CAC 40 index advanced 1.0 percent to 3,845.57.

The Stoxx 50 index of leading eurozone companies gained 1.29 percent to 2,769.09 points.

"The FTSE 100 traded back around the 5,800 level on Tuesday, supported by heavyweight mining shares, whilst UK inflation held steady at 4.5 percent, applying less pressure on the Bank of England to raise interest rates," said Joshua Raymond, chief market strategist at City Index traders.

British 12-month inflation stood at 4.5 percent in May, unchanged from the level in April but nevertheless at the highest level for more than two-and-a-half years, official data showed.

Rising food and energy costs are lifting inflation in Britain and abroad, threatening the world's economic recovery.

Separate official data published Tuesday showed China's inflation rate had hit its highest level in nearly three years in May, prompting Beijing to further restrict bank lending to stem a flood of capital.

China's consumer price index jumped to 5.5 percent year-on-year in May -- far above the official annual target of 4.0 percent -- as food costs soared on power shortages and crippling droughts in some areas.

While the data underlined concerns over rising costs, it met forecasts and sent Asian stock markets higher. Many nations in the region rely heavily on the world's second-biggest economy to help drive their own growth.

"Traders can be a fickle bunch and today's price action reminds us of this fact," said Raymond.

"Last week they sold off their holdings in mining stocks due to a three percent fall in copper demand by China.

"Now with data this morning showing that Chinese inflation rose to 5.5 percent... and industrial production slowed less sharply than feared, traders have been happy to buy back into the miners on hopes that the data reaffirms near term strength in copper demand," he added.

In London, shares in copper miner Kazakhmys jumped 2.19 percent to 1,262 pence but commodities giant Glencore slid 3.15 percent to 506.9 pence on profit-taking after the newly-listed Swiss group reported a 47 percent increase in first-quarter net profits to $1.3 billion (900.5 million euros).

Copyright AFP (Agence France-Presse), 2011