European stocks jump on Fed comments

European stocks posted strong gains on Tuesday as Wall Street set an all-time high for intraday trades after the US Federal Reserve reaffirmed its aggressive stimulus policy.

London's FTSE 100 index of top companies jumped by 1.36 percent to close at 6,431.95 points, Frankfurt's DAX rallied 2.32 percent to a five-year high of 7,870.31 and in Paris the CAC 40 leapt by 2.09 percent to 3,787.19 points, its highest level since the start of the year.

In New York, the Dow Jones Industrial Average surged to a record high in midday trading, surpassing a level set more than five years ago.

The Dow jumped to 14,275.96 points, a gain of 1.05 percent that put it well past the previous intraday high of 14,198.10 set on October 11, 2007.

The broad S&P 500 index was up by 1.03 percent and the Nasdaq Composite of high-tech stocks had gained 1.21 percent.

Back in Europe, Madrid gained 2.15 percent to 8,423.30 points and Milan surged by 2.78 percent to 15,974.00 points, despite ongoing political limbo in Italy in the wake of last week's elections.

In foreign exchange activity, the euro eased however to $1.3017 from $1.3024 late on Monday in New York. The price of gold edged up to $1,579.75 an ounce on the London Bullion Market from $1,574.25.

In the United States, "a run of better-than-estimated economic data has overshadowed concern over federal spending cuts known as the Sequesters," ETX Capital analyst Ishaq Siddiqi noted.

CMC Markets counterpart Michael Hewson added that "despite continued lousy economic data, from Europe in particular, investors continue to take comfort from the fact that the Federal Reserve looks set to keep its foot hard on the stimulus pedal."

Janet Yellen, vice chairwoman of the Fed board of governors, said in a speech that the central bank intends to "keep monetary policy highly accommodative until well into the recovery".

Traders appeared to shrug off the lack of action in Washington on dealing with sequestration drama, or $85 billion worth of US federal spending cuts that came into effect on Friday and which could shave around 0.5 percentage points off growth.

"The markets continue to consolidate around their highs... and remain supported by the prospect that whatever happens from a macro perspective, central banks will remain as a backstop in case they are needed to pump more money into the system," said analyst Angus Campbell at traders Capital Spreads.

In European company news, Standard Chartered's share price rallied 3.23 percent to 1,837.5 pence after the British-based emerging markets bank said it experienced good momentum so far this year, despite posting flat 2012 profits.

The bank said net profits came in at $4.79 billion last year, compared with $4.75 billion in 2011, even after it was slapped with a huge fine for violating US sanctions on Iran and three other countries.

Mining shares were also in demand, with Xstrata stock leaping by 6.78 percent to 1,174 pence, Glencore up by 5.74 percent at 391.2 pence, and Rio Tinto gaining 3.69 percent to 3,348.5 pence.

Asian equity markets had also climbed earlier on Tuesday, rebounding from a sell-off in the previous session, with Shanghai leading the turnaround as China's annual parliamentary gathering kicked off.

The Shanghai stock market jumped 2.33 percent, reversing some of its 3.65-percent dive on Monday, when property and construction stocks were hit after the government set out rules aimed at capping house prices.

But eyes were on China's National People's Congress (NPC), which opened Tuesday with outgoing Premier Wen Jiabao saying the government would target growth of 7.5 percent for the world's number two economy in 2013 and 3.5 percent inflation.

Elsewhere in Asia, Hong Kong rose 0.10 percent, Tokyo added 0.27 percent and Seoul advanced 0.17 percent, while Sydney jumped 1.29 percent in value.

burs-wai/br