Thursday May 7, 11:33 AM
European stocks jump before ECB rate call
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LONDON (AFP) - Europe's leading stock markets rose strongly in morning trading on Thursday as traders awaited a key ECB rate decision and results of so-called "stress tests" of US banks hit by the global credit crunch.
London's FTSE 100 index of leading shares jumped 2.06 percent to 4,487.04 points, in part aided by positive earnings news from Barclays bank (NYSE: BCS-P - news) .
"A couple of months ago there was no end to the bad news, but recently investors seem to be treating any positive news as evidence that markets have turned the corner," said David Jones, chief market strategist at financial spread-betting firm IG Index in London.
"It is hard to argue against current sentiment in stock markets and today has seen the FTSE get back to levels last visited in the second week of January.
"After the sort of run we have seen, the market is ripe for some sort of correction -- but at the moment there is no sign of this and any weakness still proves to be short-lived as the perceived bargains are snapped up."
Frankfurt's DAX 30 (Xetra: news) index rose 1.56 percent to 4,957.08 points and the Paris CAC 40 jumped 1.69 percent to 3,338.90 points as the European Central Bank was expected to cut eurozone interest rates to a record low 1.0 percent later Thursday.
The Bank of England was forecast to leave British borrowing costs at an historic low level of 0.5 percent in a decision due shortly before the ECB rate call, dealers said.
Ahead of the rate decisions, the DJ Euro Stoxx 50 index of leading eurozone shares advanced 1.53 percent to 2,474.64 points.
The European single currency edged up to 1.3336 dollars.
Following the European rate decisions, US authorities are to release results of "stress tests" on leading banks, in the hope that the process will boost confidence in a financial system reeling from the prolonged recession.
Financial markets have been nervous ahead of the results, amid fears that key lenders will face capital shortfalls that require them to constrict lending further and crimp activity in a weakened economy.
"Expectations are that the results of the Fed's stress tests for US banks aren't going to reveal any surprises, with Treasury Secretary Tim Geithner saying the results will paint a reassuring picture for the sector," said Jones.
In London, Barclays (LSE: BARC.L - news) ' share price gained 2.17 percent to 294.25 pence after Britain's third biggest bank by market value said net profit rose 12 percent in the first quarter to 826 million pounds (942 million euros, 1.25 billion dollars), boosted by its part-purchase of failed US investment giant Lehman Brothers (NYSE: LEH - news) .
However in Paris, Societe Generale (Paris: FR0000130809 - news) slumped 4.71 percent to 41.70 euros after the French banking giant said it suffered a net loss of 278 million euros (370 million dollars) in the first quarter on writedowns and higher risk costs.
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