European stocks rally on hopes of eurozone fund boost

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Báo Đầu Tư English - 36 month(s) ago 10 readings

European stocks rally on hopes of eurozone fund boost

Europe's stock markets and the euro rallied on Wednesday, boosted by a newspaper report that EU leaders were close to massively increasing their bailout fund for troubled eurozone economies.

Europe's stock markets and the euro rallied on Wednesday, boosted by a newspaper report that EU leaders were close to massively increasing their bailout fund for troubled eurozone economies.

But a downgrade of Spain's credit rating tempered the mood and reports the German government is slashing its 2012 growth forecast, in the run up to a EU summit set to centre on the debt crisis starting on Friday.

London's FTSE 100 index of top shares closed up 0.74 per cent to 5,450.49, despite the Bank of England saying it expected no pick-up for Britain's stalled economy in the current fourth quarter.

Frankfurt's DAX 30 gained 0.61 per cent to 5,913.53 points despite reports that the government will on Thursday slash its 2012 growth forecast to 1.0 per cent from 1.8 per cent.

In Paris the CAC 40 won 0.52 per cent to 3,157.34 points.

Milan jumped 2.02 per cent and Madrid gained 0.43 per cent despite the two notch downgrade by Moody's to A1 from Aa2, which further cited risks to the Spanish economy from the eurozone crisis.

In foreign exchange deals, the European single currency soared as high as $1.3857, then slid back to 1.3775 in late London trade, but still up from $1.3752 late in New York on Tuesday.

The dollar treaded water against the Japanese currency, trading at 76.80 compared to 76.81 late on Tuesday.

Markets took their lead from a report in a British newspaper that France and Germany had agreed to more than quadruple the European Financial Stability Facility (EFSF) bailout fund.

Citing unnamed European Union diplomats, The Guardian said the eurozone's two biggest economies would boost the rescue fund to two trillion euros ($2.7 trillion) from its current 440 billion euros.

If correct, the news would be a massive boost to markets as dealers have for months been concerned that Europe did not have sufficient funds if Spain or Italy run into trouble.

EU leaders are under intense pressure to agree on a blueprint for a solution to the debt crisis, which has ravaged the eurozone and threatens to stall global growth, when they meet this weekend for a summit in Brussels.

However doubts quickly emerged amid conflicting reports that European officials were still debating the size of the EFSF.

A European diplomat told AFP that European leaders would discuss raising the EFSF to one to two trillion euros.

"A Guardian newspaper article has sparked the renewed optimism, but contains no new details which have not already been trialled reporting simply that Germany and France have reached an agreement to increase the size of the EFSF," said economist Lee Hardman at The Bank of Tokyo-Mitsubishi UFJ in London.

US stocks were mixed in midday trade.

The Dow Jones Industrial Average rose 0.32 per cent to 11,613.57 points.

The broader S&P 500 was off 0.04 per cent to 1,224.86 points, while the tech-heavy Nasdaq Composite slid 0.50 per cent to 2,644.20 points.

"After rebounding to notch a triple-digit win on Tuesday, the Dow Jones Industrial Average is trading closer to break even this morning," said Andrea Kramer of Schaeffer's Investment Research.

"On one hand, optimists are clinging to hope that unconfirmed reports of a eurozone rescue agreement between France and Germany are real, and are essentially shrugging off Moody's downgrade of Spain's government bond ratings.

"However, a rare earnings miss from tech titan Apple Inc. (AAPL) has deflated more than a few bulls," said Kramer, referring to the company's below-forecast earnings.

The iconic California company reported record-high September quarter profit of $6.62 billion on revenue of $28.27 billion.

Asian stock markets meanwhile mostly closed higher on Wednesday, with Hong Kong surging 1.29 per cent, Tokyo up 0.35 per cent and Sydney adding 0.64 per cent.

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