European Stocks Finish Higher on Credit Markets Relief
European stocks closed higher Wednesday as investors shrugged off a sharp drop in U.S. durable goods figures for August, and concerns over tightness in the credit market eased on news the Bank of England received no bids for its liquidity injection.
U.S. stocks traded higher in mid-morning, helped by news of General Motors' deal ending a strike and expectations that the Federal Reserve would cut interest rates again to spur growth.
The London FTSE-100, Paris CAC-40 and Frankfurt DAX were all higher, with the FTSE CNBC Global 300 also in positive territory.
Overall credit market conditions eased, not due to improvements in the underlying conditions but because the U.S. Federal Reserve is expected to cut rates again in October.
The best performers were the financial services, with some good news in the banking sector, followed by utilities, technology, telecoms and insurance.
Shares in beleaguered U.K. bank Northern Rock closed 13.4% higher, on news the troubled U.K. bank had received a number of approaches including a possible offer for the company. It also canceled its planned $118 million dividend Tuesday.
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Also in the banking sector, the Royal Bank of Scotland-led consortium doubled its stake in its takeover target ABN Amro to more than 8%. The move could cut the cost of its potential bid by about 1%, the Financial Times reported. Shares of RBS gained 1.18%, while ABN gained 0.46%.
Nasdaq and Borse Dubai have reportedly reached a key agreement with OMX's biggest shareholder to buy shares in the Nordic bourse operator for 265 Swedish kronor each ($40.76), a person familiar with the situation told Dow Jones Newswires. Shares of OMX, which were suspended earlier in the day, closed over 2% higher.
Swedish clothes retailer Hennes & Mauritzmissed analysts' expectations with its third-quarter pretax profit, but said August sales rose 11% year-on-year. Its stock price rose by more than 3% as investors seemed to share the company officials' opinion that the discount clothes retailer has advantages in a world where consumers may watch their purses more closely.
"When the money gets scarce, you have to look for the best buy, and we have competitive prices," H&M Chief Financial Officer Leif Persson told "European Closing Bell."
In economic news, the British economy grew slightly faster than predicted in the first half of 2007, according to the Office for National Statistics, as concerns over the recent credit turmoil cast doubts on future monetary policy.
And French President Nicolas Sarkozy unveiled his draft budget for 2008, which set a deficit of 41.7 billion euros ($58.80 billion) –- higher than an expected 38.3 billion euros spending gap in 2007 and risking provoking the wrath of the European Commission.