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European stocks advance on Italian political news

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(Globalpost/GlobalPost)

European stock markets rose on Monday, with sentiment bolstered by a new government in Italy, while investors also eyed this week's upcoming interest rate decisions, dealers said.

In afternoon deals, London's FTSE 100 index of top companies added 0.18 percent to 6,437.88 points, Frankfurt's DAX 30 gained 0.45 percent to 7,850.22 points and the Paris CAC 40 rose 0.94 percent to 3,845.90.

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 yen from 97.99.

Milan's FTSE Mib stocks index meanwhile jumped 1.59 percent to 16,829.10 points as the market also won support from a successful bond auction.

"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 on Monday, 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 three billion euros ($2.29 billion) in ten-year bonds at a rate of 3.94 percent compared to 4.66 percent on March 27.

Italy also raised three billion euros in bonds due to mature in 2018 at a rate of 2.84 percent, compared with 3.65 percent 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 percent to 14,733.89 points while the broad-based S&P 500 added 0.25 percent at 1,586.16, and the tech-rich Nasdaq Composite Index gained 0.34 percent 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 percent.

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.

"The main focus this week will be on the Fed and ECB but as recent economic numbers have painted a fairly moribund picture of global economy investors will be predicting a dovish tone from policy makers," said Mike McCudden, head of derivatives at online stockbroker Interactive Investor.

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.

The combined reading of business and consumer confidence, released by the European Commission, fell 1.5 points from March to 88.6 points because of an especially souring mood in the services sector.

European Union-wide, the index fell even more strongly, down 1.8 points to 89.7 points, the data showed.

"April's (commission) consumer and business survey supports other evidence that the eurozone is experiencing its longest recession on record," said Jennifer McKeown of Capital Economics

In earlier Monday deals, Asian equities were mixed after US economic growth data came in below forecast owing to deep federal spending cuts.

With Tokyo and Shanghai closed and the May Day bank holiday coming up on Wednesday, trading was quiet, while there were few other catalysts to drive activity.

Hong Kong rose 0.15 percent and Sydney closed up 0.56 percent, while Seoul ended down 0.20 percent.

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http://www.globalpost.com/dispatch/news/afp/130429/european-stocks-advance-italian-political-news