European stocks close higher despite Northern Rock slump
Friday, 21 September 2007
LONDON, Sept 20 (AP): European stocks made big gains Wednesday, buoyed by the US Federal Reserve's decision to slash its key interest rate by half a point and the ensuing rally in US stocks.
The UK's FTSE 100 Index shot up 2.8 per cent to close at 6,460.00, marking its best-performing two-day run since March 2003. France's CAC-40 index similarly gained 3.3 per cent to 5,730.82 and Germany's DAX index rose 2.3 per cent to close at 7,750.84.
In the US stocks rose, building on the Dow Jones industrial average rally a day earlier of more than 335 points.
The Fed responded to the spilling of credit market problems into the rest of the economy by saying "the tightening of credit conditions has the potential to intensify the housing correction and to restrain economic growth more generally."
However, some commentators warned that the bigger-than-expected cut is likely to be the last for some time.
"The Federal Reserve has gone to the top end of peoples' expectations creating a terrific sense of relief in the equity market. But the flip-side is that the Fed is clearly very worried about the US economy," said Roger Cursley, equity strategist at Investec.
Financial sector stocks, the main victim of the recent selloff, made strong gains as investors worked through the implications of the Fed's easing in rates.
Allied Irish Banks gained 8.8 per cent, while France's Societe Generale climbed 7.5 per cent. Spain's Banco Santander added 3.6 per cent, while Germany's Deutsche Bank gained 4.9 per cent.
Credit Agricole rose 2.2 per cent despite the French bank saying late Tuesday that unauthorised trading at its Calyon corporate and investment bank and turbulent markets in September would have a negative impact on third-quarter earnings.
The UK's troubled mortgage bank, Northern Rock, remained the only negative, falling 16 per cent as speculation circulated that offers for the company could be far below its current share level, much lower than anticipated.
The UK's FTSE 100 Index shot up 2.8 per cent to close at 6,460.00, marking its best-performing two-day run since March 2003. France's CAC-40 index similarly gained 3.3 per cent to 5,730.82 and Germany's DAX index rose 2.3 per cent to close at 7,750.84.
In the US stocks rose, building on the Dow Jones industrial average rally a day earlier of more than 335 points.
The Fed responded to the spilling of credit market problems into the rest of the economy by saying "the tightening of credit conditions has the potential to intensify the housing correction and to restrain economic growth more generally."
However, some commentators warned that the bigger-than-expected cut is likely to be the last for some time.
"The Federal Reserve has gone to the top end of peoples' expectations creating a terrific sense of relief in the equity market. But the flip-side is that the Fed is clearly very worried about the US economy," said Roger Cursley, equity strategist at Investec.
Financial sector stocks, the main victim of the recent selloff, made strong gains as investors worked through the implications of the Fed's easing in rates.
Allied Irish Banks gained 8.8 per cent, while France's Societe Generale climbed 7.5 per cent. Spain's Banco Santander added 3.6 per cent, while Germany's Deutsche Bank gained 4.9 per cent.
Credit Agricole rose 2.2 per cent despite the French bank saying late Tuesday that unauthorised trading at its Calyon corporate and investment bank and turbulent markets in September would have a negative impact on third-quarter earnings.
The UK's troubled mortgage bank, Northern Rock, remained the only negative, falling 16 per cent as speculation circulated that offers for the company could be far below its current share level, much lower than anticipated.