Dow Jones/London
European stocks rose yesterday, as investors reacted to improvement in German business confidence, but came off session highs as a setback in US budget talks pressured Wall Street.
Investors also took comfort from an upgrade late Tuesday of Greece’s credit rating.
The Stoxx Europe 600 index rose 0.4% to close at 281.63, a high for 2012.
“Everybody is looking at the market and sees that it is pretty strong. There is some technical buying and this is a good market to show some new stocks in portfolios to clients,” said Koen de Leus, strategist at KBC Securities.
“Hope is high that [US policy makers] will find a solution to the fiscal cliff, but hope is not a good strategy,” he said.
“The ISM index is pretty weak, but stocks are still rallying,” de Leus said. “It must mean that investors think US growth will accelerate in coming months and if this is not the case, we are in for some rough months in the coming year.”
Heavyweight banking shares drove gains for the index, with HSBC Holdings moving up 2% in London, Banco Santander rising 0.9% in Madrid and BNP Paribas gaining 1.6% in Paris.
Credit Suisse lifted the European banking sector to benchmark from small underweight, saying the lower cost of capital should make it easier to reach required profitability levels. The analysts also highlighted that the sector should benefit from “a likely upturn in the economic cycle.”
Also in the sector, shares of UBS slipped 0.3%. The bank agreed to pay $1.5bn in settling accusations of manipulating the London interbank offered rate.
Meanwhile, Greek shares rallied, with the Athens General Index surging 4.8% to 878.41.
Serving as the catalyst, Standard & Poor’s Ratings Services upgraded Greece’s credit rating on Tuesday from selective default to B minus, citing the completion last week of its distressed debt buyback.
Prices on the country’s government bonds rallied to their highest level since a debt restructuring in March.
In another development, the European Central Bank decided to again accept Greek government bonds at its monetary-policy operations.
On the data front, European investors took note of the Ifo German business-climate index, which rose for a second straight month in December and came in slightly higher than expected at 102.4.
Investors also focused on developments in US budget negotiations, hoping that Democrats and Republicans will reach a deal to avert automatic tax hikes and spending cuts slated to come into effect in the new year-the so-called fiscal cliff.
Frankfurt’s DAX 30 index gained 0.2% to 7,668.50, with shares of Deutsche Bank closing up 1.4% and Commerzbank rising 0.5%.
Shares of ThyssenKrupp picked up 2.4%, after Credit Suisse lifted its rating on the industrial conglomerate to outperform from neutral.
Also in Paris, shares of oil giant Total SA climbed 0.4%, tracking gains for oil prices.
The CAC 40 index moved 0.4% higher to 3,664.59, with Credit Agricole SA shares trading up 2.3%.
And in London, the FTSE 100 index rose 0.4% to 5,961.59.
