Euro markets climb; FTSE hits 5-yr high

LONDON: European stock markets closed higher yesterday, with London??™s FTSE 100 finishing at its highest level in more than five years.

Trading was cautious however as traders awaited a decision on US interest rates from the Federal Reserve later yesterday.

The US central bank was widely expected to keep US borrowing costs at 5.25%, leaving the market to concentrate on the Fed??™s accompanying statement that is forecast to signal continued worries about inflationary pressures.

London??™s FTSE 100 index of leading shares closed 0.52% higher at 6,214.60 points, its highest level since February 13, 2001.

In Paris the CAC 40 rose 0.33% to 5,422.28 while in Frankfurt the DAX added 0.28% to end the day at 6,264.92.

The DJ Euro Stoxx 50 index of top eurozone shares increased 0.13% to 4,019.14 points.

US stocks were mixed in morning trade with the Dow Jones Industrial Average down 0.24% at 12,099.22 after closing at a record high of 12,127.88 on Tuesday.

The leading blue-chip index has soared to record heights amid a flurry of upbeat corporate earnings reports from the likes of McDonald??™s, Coca-Cola and JPMorgan Chase.

The technology-stacked Nasdaq composite was up 0.35% at 2,353.04 while the broad-market Standard & Poor??™s 500 index was 0.10% higher at 1,378.74.

In London, Tate and Lyle led the FTSE 100 ??“ Europe??™s biggest sugar refiner surging 3.76% to 801 pence after announcing it was exploring the full or partial disposal of its starch operations in Europe owing to recent changes in the EU regulatory regime for sugar.

The FTSE won broad support from mining stocks, which rose in reaction to higher commodity prices. Xstrata jumped 1.90% to 2,254 pence and Rio Tinto won 1.58% to 2,895 pence.

Elsewhere in Europe, in Madrid the Ibex 35 index advanced 0.42% to 13,636.3 points to hit a new record, in Milan the SP-Mib closed 0.28% higher at 39,407 points and in Amsterdam the AEX index fell 0.04% to 492.71 points.

The Swiss SMI index gained 0.23% to 8,682.5 points while the Bel 20 index in Brussels climbed 0.26% to 4,174.17 points.

The dollar eased against the euro and the yen as dealers weighed up data showing a further slowdown in the US housing market and waited for a decision on US interest rates.

The European single currency rose to $1.2588 in European trading, from $1.2558 in New York late on Tuesday.

The dollar stood at ??119.14 from ??119.35 late on Tuesday.

Dealers expect the US Federal Reserve to keep open the possibility of another interest rate rise. It is widely expected to keep its key rate at 5.25% for now.

"We obviously know the Federal Reserve is going to keep rates on hold so we??™ll try to read the tea leaves (the Fed statement) to gather a sense of tone from the Fed on whether they are hawkish or dovish," said State Street head of Asia-Pacific research Harvinder Kalirai.

Data yesterday showed US existing home sales fell by 1.9% to 6.18mn units in September, the lowest level since January 2004. The figures were well below expectations for a more moderate fall to 6.25mn and suggested that the housing market downturn was set to continue.

"While we may be seeing some flattening of the recent steep downward trend in the housing market, we expect the broader (downward) trend to continue for another six to nine months," said Wachovia economist Phillip Neuhart.

The euro found modest support from a buoyant business survey in Germany.

Business confidence in Germany rose unexpectedly in October on optimism that an imminent rise in sales tax will not harm recovery of the eurozone??™s biggest economy.

The widely watched business climate index, calculated each month by the Munich-based economic research institute Ifo, rose to 105.3 points in October from 104.9 points in September, Ifo said in a statement. The increase took analysts by surprise: consensus forecasts had been pencilling in a slight decrease in the barometer this month. ??“ AFP