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LONDON, Nov 29 AFP

November 30 2012, 04:46AM

European stocks have rallied, mirroring gains elsewhere, on optimism over talks aimed at avoiding a so-called fiscal cliff in the United States, and after upbeat unemployment data in Germany.

Madrid's IBEX 35 index soared by 1.74 per cent to 7,973.70 points, rebounding from losses the previous day following heavy job cuts at Spanish nationalised lender Bankia.

The European single currency advanced to $US1.2956 from $US1.2939 late in New York on Wednesday.

On the London Bullion Market, gold prices rose to $US1,725 an ounce from $US1,708 on Wednesday.

"Europe's markets have continued where US markets left off last night, pushing higher on a combination of optimism about a deal that will nip the problem of the impending US fiscal cliff in the bud," said Michael Hewson, senior market analyst at CMC Markets UK.

A bid by German giant Siemens to buy the rail and signalling division of UK systems and solutions provider Invensys for STG1.742 billion ($A2.68 billion) also boosted investor confidence, he said.

US stocks pushed higher in early trade, chasing solid gains in markets in Asia and Europe, helped by a strong upward revision in the US economic growth estimate for the third quarter.

But by midday the Dow Jones Industrial Average had pulled back to show a loss of 0.07 per cent to 12,976.24 points after the latest comments from US House of Representatives speaker John Boehner on scant progress of talks to avoid the fiscal cliff.

The S&P 500 gained 0.07 per cent to 1,410.93 points, while the Nasdaq Composite added 0.26 per cent to 2,999.68 points.

The US economy grew at a 2.7 per cent pace in the third quarter, faster than the two per cent previously estimated, the Commerce Department said.

US jobless claims fell back to 393,000 in the most recent week, the Labor Department said on Thursday, still showing the impact of superstorm Sandy which blasted the Northeast in late October.

The V2X indicator which measures volatility on the Eurostoxx 50 index of the 50 biggest quoted companies in the eurozone fell to the lowest level since 2007, before the collapse of Lehman Brothers marked the beginning of the financial crisis.

Asian markets mostly rose with Tokyo adding 0.99 per cent, Sydney up 0.68 per cent, Seoul climbing 1.15 per cent, and Hong Kong rising 0.99 per cent, but Shanghai fell 0.51 per cent to a near four-year low.

President Barack Obama said on Wednesday he expected a solution would be found before Christmas to avert the "fiscal cliff" of automatic taxation hikes and spending cuts that will be activated on January 1 if they fail to reach agreement.

European sentiment was also boosted on Thursday by official data showing that Germany's jobless total rose 5000 in November from October. That beat forecasts of a 15,000 gain, according to Dow Jones Newswires.

"The number ... is definitely good news, especially if we bear in mind the estimate was much higher," said trader Anita Paluch at Gekko Global Markets.