European stocks extend gains, despite eurozone tension

AFP, Wednesday 20 Jul 2011

Shares gain ground in spite of heightened warnings on the importance of reaching a deal on Greek debt at a eurozone summit tomorrow

Europe's main stock markets rose further on Wednesday, boosted by gains in Asia and overnight on Wall Street, as investors assessed global debt concerns.

Stocks rose despite heightened warnings on Wednesday from the European Commission president and from France of the importance of reaching a deal on Greek debt at a eurozone summit on Thursday.

London's FTSE 100 index of top shares rose 0.85 per cent to 5,839.90 points in late morning trading. Frankfurt's DAX 30 edged up 0.12 per cent to 7,201.30 points and in Paris the CAC 40 index climbed 1.10 per cent to 3,735.87.

The Stoxx 50 index of leading eurozone companies firmed 1.10 per cent to 2,686.26 points.

European equities had already mounted a technical rebound on Tuesday, supported by strong company results after sustained losses on concerns that the eurozone and US debt crises could derail the global economy.

Markets rose further on Wednesday "as (US President Barack) Obama sheds light on a possible deal with Republicans to deal with the US deficit," said Spreadex trader Simon Furlong.

"Worries over Europe are unsurprisingly still a persistent burden on the markets."

On Tuesday, Obama urged polarised lawmakers to find an "11th-hour" deal to avert a calamitous August debt default, but said he saw progress as he praised a new bipartisan plan.

Washington hit its $14.3-trillion debt ceiling on 16 May and has used spending and accounting adjustments, as well as higher-than-expected tax receipts, to continue operating normally, but can do so only until 2 August.

Finance and business leaders have warned that if the US debt ceiling is not raised by then, shock waves could roll through a world economy still reeling from the 2008 collapse. Obama has warned of economic "Armageddon."

Wall Street surged on Tuesday after companies including IBM, Coca-Cola and Wells Fargo reported strong second-quarter profits and rays of a solution emerged from the debt-ceiling stalemate in Washington.

The Dow Jones Industrial Average gained 1.63 per cent to close at 12,587.42 points.

Asian stocks mostly rose on Wednesday after Obama threw his weight behind a plan to slash the country's deficit.

Markets were meanwhile awaiting Thursday's key eurozone summit aimed at trying to overcome divisions and complete a second rescue for Greece, and also calm tension on financial markets which is dragging Italy and Spain towards the debt crisis.

Spain's troubled banking sector continued to be hit on Wednesday, with shares in Bankia, the Spanish lender forged from the merger of seven savings banks, fell 1.9 per cent to 3.68 euros when trading began for the first time.

The government has pushed Bankia to list its shares to shore up capital after the collapse of a property boom left lenders exposed to bad debts.  

The stock market flotation is a key test of Madrid's strategy to strengthen Spanish banks.

Short link: