By Sara Sjolin, MarketWatch
LONDON (MarketWatch) -- Germany's DAX 30 index led European
stocks markets higher on Thursday, with the benchmark settling at
its highest level in almost five years on the back of surprisingly
strong factory-order data.
The broader markets held on to gains, after the European Central
Bank kept interest rates unchanged as expected and as investors
watched developments in Washington regarding the so-called fiscal
cliff.
The pan-European Stoxx Europe 600 index rose 0.7% to 278.82, the
strongest closing level in 2012.
"Markets are anticipating that a deal over the fiscal cliff will
be done. They are saying 'Look, there's no alternative to a deal
and there may be quite a bit of difference between the Democrats
and the Republicans, but at least we know where their boundaries
lie'," said Mike Lenhoff, Chief Strategist at Brewin Dolphin.
"It will work as a great stimulus for the global economy when
the fiscal cliff gets resolved. It has been the key thing
inhibiting growth because U.S. corporations have been reluctant to
commit themselves to investments. It all has to do with the
uncertainty arising from the fiscal cliff and recession fears," he
said.
Germany's DAX 30 index closed 1.1% higher at 7,534.54--its
highest closing level since January 2008. The index was boosted by
data for factory orders in October, which jumped 3.9%. Economists
had forecast a rise of around 0.9%.
Shares of Beiersdorf AG rose 2%, after the consumer-products
firm raised its sales growth forecast for 2012 to more than 4% from
3-4% previously.
Among other notable gainers, shares of European Aeronautic
Defence & Space Co. jumped 8% after the firm said late
Wednesday that it would undertake a major share-structure overhaul.
It will replace its current structure with a "normal company
governance scheme," which will result in Daimler AG and Lagardere
SCA reducing their stakes in the firm.
Daimler said Thursday it sold off a 7.5% stake in EADS as
planned. Its shares rose 1.2%, while those of Lagardère fell 2.8%,
after Deutsche Bank cut the stock to sell from hold.
ECB stands pat
European interest rates were also in focus on Thursday, after
the European Central Bank left its key lending rate at a record low
0.75%. At the following news conference, ECB President Mario Draghi
said there had been a "wide" discussion on interest rates, but that
the "prevailing consensus" was to leave them unchanged..
In addition, ECB economists cut their projections for 2012 and
2013 for the euro-zone economy.
The Bank of England also stood pat and left the size of its
asset-purchase program at 375 billion pounds ($604 billion), while
keeping its lending rate at a record low 0.5%, where it has stood
since March 2009.
Investors also tracked developments in U.S. budget negotiations.
President Barack Obama and House Republican leaders dug in on their
positions Wednesday. .
Some analysts, however, saw potential for progress.
"A growing number of Republicans have indicated that they are
willing to accept a deal that will allow the Bush tax cuts for the
most affluent to expire in 2013," analysts at Danske Bank said in a
note.
"This is the most important demand by the Democrats in order to
reach an agreement," they said.
On the data front in the U.S., initial jobless claims for last
week printed at 370,000, down 25,000 from the previous reading and
slightly better than expected.
U.S. stocks traded higher on Wall Street.
Italy's FTSE MIB index bucked the positive trend across Europe
and dropped 0.8% to 15,835.22, on concerns the country's government
could collapse after a parliamentary confidence vote on a
government decree.
Movers
Among notable movers in Europe, shares of Rolls-Royce Holdings
PLC fell 3.1% in London, after the power-systems firm said
individuals and the company could be prosecuted in cases related to
overseas corruption and bribery.
The FTSE 100 index added 0.2% to 5,901.42.
France's CAC 40 index rose 0.3% to 3,601.65, with shares of
Technip SA up 0.4%. The oil-field-services firm said it was awarded
a contract to develop the Starfish Field in Trinidad and
Tobago.
Pointing in the other direction, shares of GDF Suez SA slumped
11%, after the energy distributor late Wednesday confirmed its
financial targets for 2012, but said recurring income would decline
in 2013.
The company's chairman and chief executive, Gerard Mestrallet,
further said Thursday that GDF expects to lose around 185 million
euros ($242.2 million) in 2012 as regulated energy tariffs set by
the French government won't offset supply costs..
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