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CNBC ON DIGG

European Stocks Close Firmly Higher on Fed-Cut Hopes

Sectors:Oil and Gas

By: CNBC.com | 29 Oct 2007 | 12:39 PM ET

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Major European markets ended in positive territory Monday, as anticipation of lower U.S. interest rates helped sentiment.

There was also relief in the financial sector that another major bank wouldn't be blindsiding the market with huge writedowns, while energy stocks looked attractive with oil prices at new all-time highs.

Asian markets closed higher as well, with investors betting that the Federal Reserve will lower rates on Wednesday. The market is pricing in a 92% chance of a quarter-point cut, based on federal funds futures contracts traded on the Chicago Board of Trade.

London's FTSE-100 [FTIND Loading... () ], the Paris CAC-40 [CAC40-FR Loading... () ] and the Frankfurt DAX [DAX-XE Loading... () ] all ended in the green.

Money moved to energy as New York light crude futures [US@CL.1 Loading... () ] hit a new record, topping $93 per barrel. The Dow Jones Euro STOXX energy index rose more than 1%.

Energy stocks were strong as New York light crude remained at elevated levels. The Dow Jones Euro STOXX energy index rose more than 1%.

UBS' Unexpected Declaration

UBS took the rare step of confirming quarterly guidance just a day before it officially reports earnings. As announced in the beginning of the month, UBS said it would lose up to 800 million Swiss francs ($688 million) in the third quarter and that further fixed-income writedowns were possible.

But after Merrill Lynch's [FTIND Loading... () ] surprisingly large losses last week, no more bad news is good news for banks and the stock rose 0.8%, outperforming the benchmark SMI, which was up 0.5 percent.

The decision by UBS to issue a surprise statement in response to an article in Swiss newspaper Sonntag speculating on a larger-than-expected loss is an indication of how jittery the financial sector has become, CNBC Europe's Dan Scott reported.