Stocks rally across most of Europe

GROWING OPTIMISM about a European Central Bank plan to intervene and buy bonds in order to reduce borrowing costs in Spain and Italy pushed stocks higher across most European markets.

The euro rose against the dollar for a second day marking the best two-day gain against the US currency for more than nine months.

DUBLIN

DESPITE THE bank holiday, the markets in Dublin and London remained open and traders who thought they were in for a quiet day when they started the day turned out to be a bit busier.

The Iseq rose 0.9 per cent, lifted by positive sentiment across European markets that started on Friday as the market continued to respond positively to comments from the ECB president Mario Draghi last Thursday.

The central bank chief said last week that the bank would act only in co-operation with euro zone bailout funds and that countries would have to ask for help first.

Kenmare Resources rose 5.3 per cent or 2½ cent to 49 cent a share yesterday on relatively strong trading volumes.

Renewed speculation that building materials group CRH might acquire a stake in an Indian business helped make the company the second biggest mover as the share price rose 3.7 per cent or 55 cent to €15.44 a share.

CRH slightly outperformed peer group stocks on a day when trading levels were close to average for the company.

Packaging group Smurfit Kappa rose 2 per cent as investors were still moved by its strong performance in June and July and on the back of containerboard price rises. Providence Resources was the biggest loser on the Dublin exchanges, closing down 7.4 per cent, or 60 cent, to €7.50 a share.

Industrial group DCC fell 1.7 per cent, or 34 cent, back to €20 as one trader said investors had “paused for breathe” given its recent strong performance of the share price through the €20 mark.

LONDON

UK STOCKS rose for a second day, extending a three-month high, as Greece and its international creditors agreed on the need to strengthen policy efforts.

Rio Tinto Group, the world’s third-largest mining company, jumped 2.1 per cent. Retailer Marks and Spencer rose 2.4 per cent after a newspaper report said that the retailer may attract a takeover bid. Centrica fell 1.1 per cent after Deutsche Bank cut its recommendation on the utility.

The FTSE 100 Index rose 0.4 per cent to 5,809, the highest since early May. The index last week rose 2.8 per cent, the biggest rise since the first week of June.

Representatives from the troika of the European Commission, European Central Bank and International Monetary Fund met with Greek Finance Minister Yannis Stournaras in Athens yesterday.

The talks will decide whether Greece continues receiving funds from the country’s €240 billion euros of rescue packages.

EUROPE

EUROPEAN STOCKS climbed, extending a four-month high for the Stoxx Europe 600 Index on the agreement on Greece’s debts.

French bank BNP Paribas led banks higher, rallying 3.8 per cent in Paris. Compagnie Financiere Richemont rose 5.2 per cent after the luxury-goods maker projected a jump in first-half profit. Car manufacturers climbed after Japanese rival Toyota raised its sales target.

German Chancellor Angela Merkel’s government backed Mr Draghi’s proposals on bond buying to help reduce the borrowing costs in Spain and Italy.

The government is “not worried” by Draghi’s comments of last Thursday, deputy Merkel spokesman Georg Streiter said when asked whether the government was concerned ECB independence might be compromised.

Stock markets advanced in 15 of the 17 western European markets that were open today. France’s CAC 40 gained 0.8 per cent, while Germany’s DAX rose 0.8 per cent.

Spanish and Italian two-year bonds climbed for a fourth day amid speculation the ECB will buy the securities in an attempt to calm euro-region turmoil.

NEW YORK

US STOCKS rose, sending the Standard Poor’s 500 Index to a three-month high on Germany’s support of ECB moves and as company earnings beat forecasts.

Bank of America, Caterpillar and Alcoa jumped at least 1.8 per cent to pace advances among the largest US companies. Best Buy surged 12 per cent as founder Richard Schulze offered to take the electronics retailer private.

One of the country’s biggest market makers Knight Capital Group, which was driven to the brink of bankruptcy by trading losses last week, fell 21 per cent.

The SP 500 rose 0.5 per cent, while the Dow Jones Industrial Average climbed 0.6 per cent.

The euro hit a one-month peak against the dollar, early in trading, adding to Fridays rally at a time when the market has been very illiquid. Trading in the euro turned choppy in London, but the single currency gained momentum midway through trading in New York as risk sentiment improved with gains in stocks. – (Additional reporting - Bloomberg)