AFP/London

Europe’s main stock markets closed higher yesterday, with London’s FTSE 100 index of leading companies adding 0.49% to 6,458.02 points as markets were cheered by a new government in Italy.

In Frankfurt, the Dax 30 rose by 0.75% to 7,873.5 points, in Paris the Cac 40 jumped by 1.54% to 3,868.68 points, and in Milan the FTSE Mib leapt by 2.2% to 16,930 points.

The euro hit a one-week high at $1.3100. It later stood at $1.3089, up from $1.3029 late in New York on Friday. The dollar dipped to ¥97.79 from 97.99.

“It’s a nice start of what is definitely going to be an interesting week,” said Gekko Markets analyst Anita Paluch.

“Markets are in green led by Italian optimism, where newly sworn government is set to tackle country’s economic problems.”

Italian borrowing rates fell sharply in a five- and 10-year debt auction yesterday, after the swearing-in of a new coalition government ended a two-month stalemate and brought fresh hope to the recession-hit country.

The government raised €3bn ($2.29bn) in ten-year bonds at a rate of 3.94% compared to 4.66% on March 27.

Italy also raised €3bn in bonds due to mature in 2018 at a rate of 2.84%, compared with 3.65% at the last similar auction on the same date.

“Yields on five and ten year debt fell to two and a half year lows at the debt auction, a clear signal that investors feel much more relaxed about the situation in Italy than they have for a long time,” noted Alpari analyst Craig Erlam.

In New York, US stocks opened higher, with confidence also boosted by the formation of a new government in Italy.

Five minutes into trade, the Dow Jones Industrial Average rose 0.15% to 14,733.89 points while the broad-based S&P 500 added 0.25% at 1,586.16, and the tech-rich Nasdaq Composite Index gained 0.34% at 3,290.29.

Later this week, on Thursday, the European Central Bank will unveil its latest interest rate decision.

Most analysts predict that the guardian of the euro will cut its key interest rate, which is already at an all-time low level of 0.75%.

The ECB may also decide to launch new measures to kick-start bank lending to businesses.

Also this week, on Wednesday, the US Federal Reserve will announce the outcome of its latest monetary policy meeting.

Adding pressure on the ECB to make moves to boost the economy was data showing confidence in the 17-state eurozone fell sharply in
April.