European equities rally despite concern over Germany

August 17, 2010
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, LONDON, Aug 17 – Europe\’s leading stock markets pushed higher on Tuesday as investors digested news of falling German investor confidence and lower British inflation in the absence of any major company announcements.

The FTSE 100 index of top shares jumped 1.17 percent to 5,337.7 points approaching midday trade in London, where investors digested news of easing inflation.

Frankfurt\’s DAX 30 climbed 1.30 percent to 6,190.12 points and in Paris the CAC 40 index added 1.50 percent to 3,651.28.

The Stoxx 50 index of top eurozone shares increased by 1.26 percent in value to reach 2,732.3 points.

Blue-chips rallied even though a closely-watched survey showed investor confidence has fallen sharply this month in Germany — Europe\’s biggest economy.

The ZEW\’s monthly sentiment indicator, based on a survey of 284 analysts and institutional investors, fell 7.2 points to 14.0 points, below the indicator’s historical average of 27.3 points and a much sharper drop than feared.

"The decrease … indicates that the enormous growth observed in the second quarter is unlikely to continue," the ZEW institute said, with weakening conditions abroad likely to hit exports, Germany\’s main growth driver.

Last week, data showed that German gross domestic product (GDP) surged in the second quarter at its fastest rate since reunification 20 years ago, with output soaring 2.2 percent compared to the previous three-month period.

This followed figures showing that exports, the backbone of the German economy, rocketed 28.5 percent year-on-year in June to reach 86.5 billion euros (111.7 billion dollars), close to pre-crisis levels.

On Tuesday, official data showed that the prices of goods in Britain rose at a slightly slower pace in July compared with June on an annual basis, largely thanks to falling transport costs.

Consumer Price Index (CPI) 12-month inflation, the government\’s target measure, fell to 3.1 percent last month from 3.2 percent in June, the Office for National Statistics (ONS) said in a statement.

However, the level remained far above the Bank of England\’s 2.0-percent target rate owing to higher food costs.

Elsewhere in stock market trade, Tokyo\’s benchmark Nikkei index fell 0.38 percent on Tuesday, closing at an almost nine-month low, on investor fears over a strong yen, analysts said.

Confidence was already dealt a blow on Monday after Japan announced its economy grew at a weaker-than-expected pace in the second quarter as its key export sector was hit by easing demand.

US stocks closed mostly flat on Monday as a slowdown in Japan\’s economic growth and tepid local manufacturing figures revived doubts about the global economic recovery.

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