Europe markets climb on China growth data

AFP/London

European stock markets climbed yesterday and the euro hit a fresh dollar high as traders cheered accelerating Chinese growth and moved on from the US debt ceiling saga.

Markets breathed a sigh of relief that US lawmakers on Wednesday agreed a deal to reopen the government and avert a default, with the earnings season now driving the mood.

Frankfurt’s DAX 30 climbed 0.60% to set a new record close at 8,865.1 points, and the CAC 40 in Paris jumped 1.09% to 4,286.03 points, its highest closing level this year.

In London, the benchmark FTSE 100 index added 0.71% to 6,622.58 points, while Madrid’s Ibex 35 rose 0.84% to climb back above the 10,000 point level for the first time since July 2011.

“A strong improvement in Chinese GDP data along with an anticipation of continued Fed stimulus into 2014 has given Europe’s markets further impetus into the end of the week, as investors celebrate the fact that the uncertainty of the last three weeks coming from the US has finally been concluded in the short term,” said Michael Hewson at CMC Markets UK.

China’s economy expanded by 7.8% year-on-year in July-September, official data showed yesterday, breaking two quarters of slowing growth.

On the foreign exchange market, the European single currency hit an 8.5-month high against the dollar for a second day running, climbing to $1.3704.

It later stood at $1.3693, which compared with $1.3677 in New York late on Thursday. The dollar fell to ¥97.77 from ¥97.91 on Thursday.

Sterling was about steady at €1.1821, and firmed to $1.6187.

The price of gold fell to $1,316.50 an ounce on the London Bullion Market, from $1,319.25 on Thursday. Gold has hit three-month highs this week, with the precious metal benefiting from its safe haven investment status amid the US debt strains.

“Although the (US) deal is temporary, and therefore risks a repeat of the recent political and fiscal dysfunction, the markets are assuming that the Federal Reserve will simply extend its accommodative policy and delay tapering of its bond purchases in order to offset any adverse impacts on the economy,” said Neil MacKinnon, economist at VTB Capital Research.

“The US dollar has been the immediate casualty in all of this and is weaker against the major currencies,” he added yesterday.

The bill restarts government operations until January 15 and raises the debt ceiling until February 7, giving lawmakers time to draw up a longer term deal.

Wall Street was mostly in positive territory on the back of bumper quarterly profits from Google, which saw its shares gain more than 13% to over the $1,000 mark for the first time.

In midday trade the Dow Jones Industrial Average was flat, while the S&P 500 rose 0.40% and the tech-heavy Nasdaq gained 0.90%.

With the US government up and running again, attention moved to economic results and the future of the Federal Reserve’s QE stimulus programme.

“The assumption is that the Fed, in recognition of this, will delay the wind-down of its quantitative easing programme,” foreign exchange traders Moneycorp said in a note to clients.

In Paris yesterday, shares in computer services consultancy group Capgemini surged 5.5% to €48.06 because it is buying activities from French energy group Areva which rose 7.3% to €14.74.