European stocks rally on Draghi’s pledge

Europe’s main stock markets rallied yesterday after the head of the European Central Bank pledged full support for the euro, easing tensions over the eurozone’s long running sovereign debt crisis. Investors also digested a string of company earnings from major bluechip companies including Anglo-Dutch oil major Shell and Spanish bank giant Santander. London’s benchmark FTSE 100 index jumped 1.08% to 5,557.46 points, the Paris CAC 40 leapt 2.08% to 3,145.83 points and Frankfurt’s DAX 30 rose 1.18% to 6,481.82. Italian shares surged by 4.06% as a successful government bond auction also eased bailout concerns, while the Spanish market soared 2.39% in value. The euro meanwhile spiked to $1.2256 from $1.2153 in New York late Wednesday. It had tumbled on Tuesday to a two-year low at $1.2043 on fears over debt-plagued Spain. European Central Bank (ECB) chief Mario Draghi pledged full support for Europe’s single currency in a key speech yesterday. The upbeat comments will fix market attention on the central bank interest rate meeting next week, dealers said. “While it would be nice to think that this morning’s market rally is all about upbeat corporate earnings, this morning’s comments by ECB President Mario Draghi, look to have been the main catalyst sending the markets higher,” CMC Markets analyst Michael Hewson said. “In particular the comments about doing whatever it takes within the central bank’s mandate to preserve the euro has seen markets rebound, but the statement that addressing high yields on sovereign debt in the euro area comes within the central bank’s mandate is particularly noteworthy. “It suggests that the ECB may well do something about capping rising bond yields. Attention will now inevitably shift the focus towards next week’s ECB rate meeting to see if he means what he says,” Hewson added. In company news, shares in Rolls-Royce soared 5.97% to 879 pence after the British maker of aircraft engines said first-half profits jumped on rising revenues, a bumper order book and the sale of its stake in US-based International Aero Engines. BSkyB jumped 2.12% to 699.50 pence after the British pay-TV giant posted rising annual net profits on solid demand for its television, Internet and telephone services. Lloyds Banking Group shares added 0.82% to 29.53 pence after the state-rescued British lender revealing narrowing net losses. Spain’s Santander, the biggest eurozone bank by capitalisation, said its second-quarter profit plunged on provisions ordered by Spanish regulators. However its shares surged 5.77% to 1.103 euros in midday deals as investors focused on the Draghi comments. On the downside, Royal Dutch Shell’s ‘A’ shares slid 3.09% to 2,119.50 pence after the energy giant said second-quarter net profits tumbled 53% to $4.063bn (€3.341bn) on lower oil prices and slack demand. from gulf times.