Europe shares, euro firmer in rebound

European stocks moved sharply higher yesterday, extending gains after recent heavy losses, on hopes EU leaders can keep Spain’s stricken banking system afloat and the eurozone debt crisis at bay. Dealers said Spain is the immediate concern amid conflicting views between a hardline Germany and other eurozone states ready for some flexibility on how to help Madrid to help its banks without resorting to a costly full debt bailout. They said the gains came even though investors had been hoping for some lead on the economy from the European Central Bank which instead held its key interest rate and 2012 forecasts unchanged. ECB head Mario Draghi said later that some central bank governors had wanted a rate cut and that yesterday’s decision was “taken by very broad consensus”—language analysts took to mean that there will be a reduction next month. He also promised the ECB would continue to extend easy financing for the banks, which investors latched on to. “To a great extent we know exactly what problems are now ... “I don’t think the situation is at all as bad as it was,” he added. Meanwhile, highlighting the growing pressure for action, US President Barack Obama and British Prime Minister David Cameron agreed on the need for an “immediate plan” to resolve the eurozone crisis. The two men “agreed on the need for an immediate plan to tackle the crisis and to restore market confidence, as well as a longer-term strategy to secure a strong single currency,” the prime minister’s office said. In London, the benchmark FTSE 100 index jumped 2.36% to 5,384.11 points. In Frankfurt, the DAX 30 rose 2.09% to 6,093.99 points and in Paris the CAC 40 gained 2.42% to 3,058.44 points. Other European markets showed similar gains, with Madrid up 2.41% while Milan soared 3.50% as the battered banks bounced back. In New York, stocks opened higher as investors there also bought back in, albeit cautiously given the uncertain background as they picked up on a report that the US Federal Reserve might be ready for more stimulus measures. The blue-chip Dow Jones Industrial Average was up 1.68% at around 1600 GMT and the tech-rich Nasdaq Composite gained 2.01%. The European single currency meanwhile rose sharply to $1.2547 from $1.2450 in New York late Tuesday. The euro hit $1.2288 last Friday, the lowest level since July 1, 2010, as markets were rocked by speculation that debt-plagued Spain could be forced into a bailout. Matthew Nelson, dealer at Spreadex in London, said Draghi’s comments and the fact that some ECB board members wanted a rate cut encouraged investors who were ready to take on some fresh risk after the recent downturn. Kathleen Brooks at Forex.com said that by leaving rates on hold, Draghi was saying that monetary policy alone cannot resolve the eurozone debt crisis and that it remained first and foremost a problem for governments to tackle.from gulf times.