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European stocks surge on ECB stimulus hopes; DAX up 1.54%

Published 06/06/2012, 04:07 AM
Updated 06/06/2012, 04:07 AM

Investing.com - European stock markets were sharply higher on Wednesday, as investors eyed the European Central Bank’s policy meeting later in the day, with hopes it will lead to further stimulus measures.

During European morning trade, the EURO STOXX 50 jumped 1.81%, France’s CAC 40 climbed 1.56%, while Germany’s DAX 30 advanced 1.54%.

Market sentiment found support amid speculation by market players that the ECB could announce liquidity injections in to Europe's troubled financial system. Other analysts expect the central bank to renew its suspended government bond-buying program to help ease pressure on Spain’s rising borrowing costs.

Sentiment had weakened after a teleconference of finance ministers from the Group of Seven industrialized nations on Tuesday ended with no immediate steps to soothe fears over the bloc’s debt crisis.

In addition, Federal Reserve Chairman Ben Bernanke was due to testify on Thursday before a congressional committee about the strength of the U.S. economy. The Wall Street Journal, citing interviews and Fed speeches, reported late Tuesday that the U.S. central bank is mulling new measures to stimulate growth in the world’s largest economy.

Financial stocks led gains as shares in French lenders Societe Generale and BNP Paribas surged 1.86% and 1.53% respectively, while Germany’s Deutsche Bank and Commerzbank climbed 0.99% and 0.61%.

Commerzbank was one of the six German lenders downgraded on Tuesday evening by Moody’s ratings agency, which also cut the ratings of Austria’s three largest banks, saying they face risks if the euro zone crisis deepens.

Meanwhile, telecom giant Nokia Finland saw shares surge 3.74%, although U.S. Internet company Google lodged a complaint with European Union competition authorities against Nokia and its U.S. software peer Microsoft. The complaint alleges collusion between Nokia and Microsoft in order to increase prices for smartphones and tablets.

In London, FTSE 100 advanced 1.26%, boosted by strong gains in financial stocks.

Shares in the Royal Bank of Scotland were up 3.70% after skyrocketing 932.52% as markets opened. The surge was said to be the result of a share consolidation authorized at the bank's annual meeting last week.

According to Sir Philip Hampton, chairman of the bank, the consolidation will reduce the "volatility" of the bank's share price and help improve investor confidence.

Meanwhile, Barclays saw shares climb 4.59% and Lloyds Banking surged 4.55%, while HSBC Holdings rose 2.34%.

Mining stocks were also on the upside, as Rio Tinto and Bhp Billiton added 2.01% and 2.61% respectively, while copper producers Xstrata and Kazakhmys jumped 1.01% and 3.25%.

Elsewhere, Diageo Plc., the maker of Johnnie Walker, J&B and Buchanan’s scotch whiskeys, advanced 1.85% after saying it will invest in scotch whiskey production.

In the U.S., equity markets pointed to a higher open. The Dow Jones Industrial Average futures pointed to rise of 0.76%, S&P 500 futures signaled a 0.95% jump, while the Nasdaq 100 futures indicated a 93% rally.

Later in the day, Germany was to produce official data on industrial production. The ECB rate announcement was to be followed by a press conference with bank head Mario Draghi to discuss the monetary policy decision and the economic outlook for the region.


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