LONDON – European stocks diverged on Tuesday, winning some support from earlier Asian gains and upbeat data, but Paris was hit by credit rating downgrade rumours and Madrid was rocked by dire economic data.
London’s benchmark FTSE 100 index of leading companies jumped 0.97 percent to 5,626.28 points as investors returned to their desks on Britain’s first trading day of 2012.
Frankfurt’s DAX 30 gained 0.62 percent to 6,112.78 points and Milan’s FTSE Mib index added 0.45 percent to 15,524.27.
But the Paris CAC 40 fell 0.68 percent to 3,200.41 points and Madrid’s Ibex 35 tumbled 1.35 percent to 8607.40.
Most European markets started 2012 with a bang on Monday, boosted by positive employment, consumer spending and manufacturing figures in Germany, Europe’s biggest economy. But London was shut for a public holiday.
“Global stock indices began 2012 in positive fashion, although the Spanish Ibex and French CAC are struggling,” said analyst David Morrison at trading group GFT.
“Spain’s budget deficit is now expected to come in well above its target of 6.0 percent of GDP, giving the new government an unpleasant New Year hangover.
“Meanwhile, the French CAC has stalled following yesterday’s sharp rally as rumours again swirl of a possible downgrade, thanks to their banks’ exposure to weakened European sovereign debt.”
Investors also digested news that Spain’s jobless numbers rose for the fifth straight month in December to a new 15-year high, posing a stiff challenge to the country’s new conservative government.
The number of registered unemployed rose from the previous month by 1,897 people, or 0.04 percent, to 4.42 million, its highest level since the labour minister started collecting the figures in 1996.
However Germany reported Tuesday its lowest annual jobless rate in two decades at 7.1 percent.
Asian equities rose Tuesday after China announced better-than-expected manufacturing data over the weekend.
Hong Kong surged 2.4 percent, Sydney jumped 1.1 percent and Seoul soared 2.69 percent. Financial markets in mainland China, Japan and Thailand were closed for holidays.
In foreign exchange deals, the European single currency rose to $1.3019 in morning London trade compared with $1.2934 late on Monday. It had forged a 15-month low last week at $1.2858 on eurozone debt crisis concerns.
And the euro climbed to 99.94 yen on Tuesday, having struck a ten-year low of 98.66 yen last week as investors sought the safe-haven Japanese unit.
“2012 is set to be the most challenging year since 2009, as the eurozone crisis continues to rage on, however the first trading sessions of the New Year have been surprisingly strong,” said analyst Kathleen Brooks at Forex.com.
“Why the New Year cheer when the situation in the global economy is still so decidedly gloomy? The rally was sparked by some better, or in Europe’s case some less worse, economic data.”
New figures showed Monday that private consumption in Germany was at its strongest level for more than a decade in 2011, despite the ongoing eurozone crisis.
Positive US economic data last week, including rising home sales, also helped buoy markets as investors look for signs of resurgence in the world’s biggest economy.
Investors also digested news that China’s manufacturing unexpectedly rebounded in December on holiday shopping, as the world’s number two economy showed some resilience despite strife in key export markets.
The purchasing managers index (PMI) reached 50.3 in December, the China Federation of Logistics and Purchasing said in a statement Sunday. A reading above 50 indicates the sector is expanding.
Debt-laden Spain said Monday that the nation’s public deficit would easily exceed the 2011 forecast of 6.0 percent of GDP as it unveiled spending cuts and tax hikes totalling 15.1 billion euros ($19.6 billion) for this year.
