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July 27, 2012, 12:19 p.m. EDT

Europe stocks lifted by ECB hopes, U.S. data

Barclays rises 9% after earnings beat forecasts

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By Sara Sjolin, MarketWatch

LONDON (MarketWatch) — European stocks ended higher Friday, boosted by hopes European officials will take action to bring down Spanish and Italian borrowing costs after German Chancellor Angela Merkel and French President François Hollande vowed to protect the euro zone.

Equities were also buoyed as data showed the U.S. economy slowed less than expected in the second quarter.

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Erasing early-morning losses, the Stoxx Europe 600 index /zigman2/quotes/210599654/delayed XX:SXXP +0.42% added 1.3% to close at 259.81, ending the week with a 0.6% gain. On Thursday, the index jumped 2.5% after European Central Bank President Mario Draghi pledged ”to do whatever it takes to preserve the euro.”

On Friday, French daily Le Monde, citing unnamed sources, said the ECB and European leaders were preparing joint action to bring down Spanish and Italian borrowing costs.

Under the plan, the rescue funds would be used to buy government bonds in the primary market, while the ECB would resume purchases of bonds in the secondary market. ECB, EU rescue fund plan joint action

German Chancellor Angela Merkel and French President François Hollande released a joint statement Friday saying they were determined to do “everything possible to protect the euro zone.” Merkel, Hollande vow to 'protect' euro zone

Cheering the move

Spanish and Italian bond yields continued to drop.

The yield on the 10-year Italian government bond declined 12 basis points to 5.94%, according to electronic trading platform Tradeweb. A basis point is 1/100 percentage point.

In Spain, the yield on 10-year paper fell 21 basis points to 6.71%. Spain’s 10-year yield had hit a euro-era record high around 7.60% earlier in the week.

Stocks in those countries also rallied. The Italian FTSE MIB index jumped 2.9% to 13,596.88, with UniCredit SpA /zigman2/quotes/200769686/delayed IT:UCG +2.78% surging 6%. On the week, the index gained 4.1%.

Spain’s IBEX 35 index /zigman2/quotes/210597995/delayed XX:IBEX +0.87% closed 3.9% higher to 6,617.60, up 5.9% on the week, partly boosted by heavyweight Banco Santander SA /zigman2/quotes/205677933/delayed ES:SAN +3.25% /zigman2/quotes/202859081/composite SAN +3.29% , up 6%.

However, the markets may be overreacting, said James Ashley, senior European economist at RBC Capital Markets, as there are still obstacles to overcome.

“The [German] Bundesbank said their view hasn’t changed at all and they don’t think bond buying is the best way to handle the crisis,” he said. Bundesbank opposes bond buys

Further haircuts for Greece

Greece also got pulled into the euro zone-debt spotlight, as Reuters reported that European policy makers were looking at ways to cut the country’s debt, with the ECB and national central banks taking losses on their holdings of Greek government bonds.

+1.91 +0.42%
Volume: 0.00
Jan. 26, 2023 5:50p
IT : Italy: Milan
+0.43 +2.78%
Volume: 15.20M
Jan. 26, 2023 5:35p
P/E Ratio
Dividend Yield
Market Cap
€29.36 billion
Rev. per Employee
XX : Spain: Madrid
+78.10 +0.87%
Volume: 0.00
Jan. 26, 2023 5:38p
ES : Spain: Madrid
+0.10 +3.25%
Volume: 61.30M
Jan. 26, 2023 5:38p
P/E Ratio
Dividend Yield
Market Cap
€51.87 billion
Rev. per Employee
$ 3.45
+0.11 +3.29%
Volume: 5.16M
Jan. 26, 2023 4:00p
P/E Ratio
Dividend Yield
Market Cap
$56.55 billion
Rev. per Employee
1 2
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