Traders work on the floor of the New York Stock Exchange yesterday. Media reports state that US stocks rose on confidence that a solution was in sight before October 17, when the government will theoretically hit its $16.7 trillion borrowing limit.
LONDON: European stock markets rose yesterday as lawmakers in the United States closed in a budget deal to reopen government services and raise the country’s borrowing limit to avoid a catastrophic default.
London’s benchmark FTSE 100 index added 0.64 percent to 6,549.11 points, as investors also reacted to news also that British inflation remained steady in September.
Frankfurt’s DAX 30 climbed 0.92 percent to set a new record close at 8,804.44 points and the CAC 40 in Paris rose 0.78 percent to 4,256.02 points. Milan added 0.43 percent and Madrid jumped 1.13 percent.
“US lawmakers are finally making headway on a deal to avert financial destruction before tomorrow’s D-day deadline, propping up market sentiment in overnight trade across US and Asian share markets and pulling up Europe,” said Ishaq Siddiqi, market strategist at ETX Capital traders.
With just days to go before Washington runs out of cash to pay its bills, Republicans and Democrats said they are close to an agreement to end a stand-off that has also partially shut the government for two weeks.
While expectations have been for a deal to be made — equities have remained buoyant despite the gridlock — the news will come as a relief because a US default would send global markets tumbling and likely spark another worldwide recession, analysts have claimed.
Despite the apparent progress towards a deal, Wall Street was mostly down in midday trading, however, as investors appeared to be profit-taking after two days of solid gains on expectations an agreement would eventually be reached.
The Dow Jones Industrial Average was off 0.22 percent to 15,267.16 points. The broader S&P 500 dipped 0.13 percent to 1,707.95 points, but the Nasdaq Composite edged up 0.03 percent to 3,816.57.
The European single currency slid to $1.3496 from $1.3559 in New York late on Monday. The dollar fell to 98.58 yen from 98.67 yen. Sterling rose against the euro but fell against the dollar.
Gold at new low
The price of gold fell touched its lowest level in three months at $1,251.84 an ounce. It recovered some ground to finish the day at $1,270.50, down from $1,285.50 on Monday.
Meanwhile, a survey revealed that investment sentiment in Germany rose in October, in a further sign of strength in the biggest eurozone economy.
The widely watched investor confidence index calculated by the ZEW economic institute rose 3.2 points to 52.8 points, beating a forecast by analysts who said it would remain stable.
It was the highest level since April 2010, as it was in September when the index reached 49.6.
On the upside, shares in British postal operator Royal Mail rallied further, as formal trading of the stock began following its controversial part-privatisation.
Royal Mail shares jumped as high as 490 pence in morning deals on the first day of trade for many of the 690,000 small investors who had bought stock last week. That increased the value of Royal Mail to as much as £4.9bn ($7.8bn), following part-privatisation of the group by Britain’s Conservative-Liberal Democrat coalition government.
That marked a vast gain of almost 50 percent from the offer price of 330 pence. Shares had already surged last Friday, and on Monday, in conditional trading among institutional investors.
In Paris, shares in cable manufacturer Nexans plunged by nearly 15 percent to ¤36.10 after the company warned it would report a loss in the second half of the year and said it would shed 468 jobs in Europe including 206 in France.
AFP
