European bourses edge up on stimulus hopes

European stock markets closed mostly higher yesterday, with banks firmer on hopes the EU will agree support measures for struggling lenders, especially in Spain. London was closed for a second public holiday Tuesday, making for subdued trade overall. In Frankfurt, the DAX 30 slipped 0.19% to 5,969.40 points while in Paris the CAC 40 gained 1.07% to 2,986.10 points. Madrid rose 0.45%, edging up again despite fears Spain could need a bailout and as top government officials repeated calls for help for the country’s banks which need to raise some 80bn euros in fresh capital. Milan meanwhile put on 0.63%. The Euro STOXX 50 closed up 0.4% at 2,087.31, extending the previous session’s modest bounce off Friday’s eight-month closing low in the aftermath of a dismal US jobs report. Volumes were curbed by a second day of UK public holidays. “If you look at equity markets in the past few days, indeed there is some expectation that something is done by governments ... or (it is) the ECB which takes the initiative,” Luca Solca, global head of European research at CA Cheuvreux, said. The eurozone’s blue-chip Euro STOXX 50 index currently trades at 8.4 times 12-month forward earnings, compared with price-to-earnings ratios of 11.9 for Wall Street’s S&P 500 and 9.3 for the MSCI Emerging equity index, according to Thomson Reuters Datastream. Investors were keenly awaiting a European Central Bank meeting today and a speech by US Federal Reserve chairman Ben Bernanke tomorrow for any further policy announcements. Banks were among the best performing sectors yesterday, ahead 0.8%, with investors heartened by the prospect of possible fresh central bank stimulus. Telekom Austria climbed 4.3% after Austrian magazine News said that Mexican telecoms tycoon Carlos Slim now holds 4.1% of the company and would pool his stake to control almost a quarter of the company. The Greek bourse underperformed sharply, skidding 5.1% as concerns intensified over the country’s future in the eurozone, with all eyes on June 17 elections and whether it will be able to form a government willing to stick to the international bailout terms. In an indication of the issues facing the eurozone, all the region’s major economies are in decline, according to the latest purchasing managers indexes, underlining why finance chiefs from the G7 held emergency talks on the debt crisis. They agreed to work together to address pressing problems in Spain and Greece, Japan’s Finance Minister Jun Azumi said. Charts showed the outlook for Euro STOXX 50 remains gloomy after the index dipped below November’s troughs last week. “The break confirms that the market holds its next target below the 2011 low point. Accordingly we are still very much in favour of selling temporary bounces such as the current one,” strategists at SEB said in a note.