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| Traders talk in front of computer boards at the stock exchange in Madrid yesterday. European shares advanced as financial stocks rose on expectations of new central bank measures to deal with the risk of a Greek exit from the eurozone |
Stocks around the world rallied yesterday despite uncertainty over Greece as investors appeared to bet on fresh stimulus from the US and Europe to boost growth and fight the eurozone crisis.
Asian markets started the rally, with European markets following and US stocks extending Thursday’s gains in early trading.
London’s benchmark FTSE 100 index closed up 0.22% to 5,478.81 points, while in Frankfurt the DAX 30 rose 1.48% to 6,229.41 points, and in Paris the CAC 40 climbed 1.82% to 3,087.62 points.
Madrid gained 0.34% and Milan jumped 2.34% after the Italian government adopted growth measures and plans to sell off some state-held companies and property.
In foreign exchange deals, the euro drifted up to $1.2635 from $1.2630 late Thursday in New York. Sterling rose against the euro and dollar in afternoon trading after initially dropping following the stimulus news.
The dollar slid against the yen, buying ¥78.68 instead of ¥79.34 late on Thursday.
“The prospect of co-ordinated central bank intervention from central banks next week in the event of turmoil caused by the result of this weekend’s Greek elections has given equity markets a boost today, and calmed some rather frayed investor nerves,” said Michael Hewson, senior market analyst at CMC Markets.
“The Bank of England took a similar approach by announcing two new stimulus packages to aid worsening economic fears and to give long term supports to UK banks allowing them to borrow loans below market rates,” added Khurram Ali, a broker at Valbury Capital.
European Central Bank chief Mario Draghi fuelled speculation of an imminent rate cut or other measures, warning yesterday of “serious downside risks” to the euro area economy while inflation saying was no threat.
However, with Spain’s borrowing costs pushing to record highs despite a 100bn-euro bank bailout, traders remain on edge.
The IMF said yesterday that Spain will likely miss its budget-cutting deficit target for 2012 and it pushed Madrid to adopt broad reforms as it grabs a rescue line for stricken banks.
US stocks forged higher in midday trade.
At around 1600 GMT, the Dow Jones Industrial Average was up 0.57% to 12,724.52 points, the broad-market S&P 500 climbed 0.64% to 1,337.64 points and the tech-rich Nasdaq Composite gained 0.79% to 2,858.74 points.
The gains followed those on Thursday, as poor jobs data sparked speculation that the US central bank would start a third round of stimulus known as quantitative easing in a bid to kickstart the world’s biggest economy.
In Britain finance chief George Osborne and Bank of England governor Mervyn King said they would flood banks with billions of pounds in a bid to jump-start lending to households and businesses and fend off a potential storm from Europe.
But while investors absorbed the possibility of fresh cash in the system Europe’s troubles tempered sentiment.