DAX rises on hopes of interest rate cut
Speculation about lower German interest rates sent Frankfurt higher. The Xetra DAX index put on 117.98 or 2.8 per cent to 4,371.10 as optimism grew after three Bundesbank council members hinted at domestic rate cuts before the end of the year.
Economists were not convinced, however, pointing out that a cut in the Bundesbank's main money market rate, currently at 3.3 per cent, would complicate European interest rate convergence.
Banks were at the centre of attention after Salomon Smith Barney said the time was right to buy equities again and upgraded Dresdner Bank and Commerz bank, among other European stocks. Dresdner rose 1.20 deutschmarks to DM59.20 and Commerzbank was DM1.73 higher at DM46.53. Deutsche Bank climbed DM2.25 to DM93.80 as rumours of a merger with J.P. Morgan resurfaced. On the downside, utilities came under pressure on renewed fears that the Greens could push for an end to the use of nuclear power in a coalition government with chancellor-elect Mr Gerhard Schroder's Social Democrats.
Paris pushed ahead strongly in the final hour of trading to close with the CAC-40 index up 82.19 at 3,361.04, against a session low of 3,243.74.
RhonePoulenc, hit by broker earnings downgrades on Tuesday, rallied 16.90 francs to Ffr215. Cap Gemini rose strongly in low volumes, gaining Ffr62 to Ffr738, with brokers said to be downplaying the shares' Asian exposure.
Amsterdam improved for the third day running, adding 16.37 to 933.97 on the AEX index with financials supplying most of the underpinning.
Madrid was buoyed by better-than-expected inflation data, and the general index rose 17.65 or 2.6 per cent to 699.03.
Milan added 782 or 4.4 per cent at 18,710 on the Mibtel index in thin volume.