Commodity stocks top gainers on China stimulus package
LONDON - EUROPEAN share prices rose in early trade on Monday, as commodity stocks soared after China unveiled a nearly US$600 billion (S$894 billion) economic stimulus plan to boost domestic demand.
At 0925 GMT (5.25pm Singapore time), the FTSEurofirst 300 index of top European shares was up 2.7 per cent at 938.95 points, on track for its eighth day of gains in the last 10.
The DJ Stoxx European basic resources index jumped nearly 11 per cent, tracking metal prices. Rio Tinto , Kazakhmys , Xstrata and Antofagasta recorded gains of 11-13 per cent.
Steelmaker ArcelorMittal jumped 15 per cent, and a 4 per cent rise in oil prices to nearly US$63.50 a barrel lifted BP , Total and Shell by 3.8-4.4 per cent.
China approved a US$586 billion government spending package and announced a shift to 'moderately easy' monetary policy despite having already made three interest rate cuts since mid-September.
'Markets are latching on to ruthlessly lower interest rates and fiscal stimulus packages as cyclical inflation pressures have disappeared, with the structural underlying tendency for disinflation', said Mr Bernard McAlinden, strategist at NCB Stockbrokers in Dublin.
'Historically cyclical bull markets have been no less frequent or sizeable in a secular bear market than in a secular bull market'.
European shares have risen 15 per cent over the past two weeks but are still down 38 per cent this year, hammered by a credit crisis that piled up losses at top banks and slowed the economy.
Around Europe, Britain's FTSE was up 2.7 per cent, Germany's DAX up 2.9 per cent and France's CAC was 3.2 per cent higher.
Cholesterol buster boosts Astra AstraZeneca rose 2.7 per cent after data showed that its cholesterol fighter Crestor dramatically cut deaths, heart attacks and strokes in patients with normal cholesterol but who have high levels of C-reactive protein.
Santander fell 3.4 per cent to 8.06 euros (S$15.44) after it unveiled a surprise 7.2-billion euro rights issue at 4.5 euros a share.
Europe's biggest bank, HSBC , was down 0.7 per cent after it posted a higher profit in the third quarter but took a US$4.3 billion charge for bad loans in personal financial services in the United States.
Mr McAlinden said that a test of whether the market was experiencing a bull phase within a bear market was its reaction to bad news.
'We had a weak employment report on Friday and markets rose', he said.
US employers slashed 240,000 jobs from payrolls last month, an unexepctedly large number, and the jobless rate shot up to a 14-1/2 year high, but the Dow Jones industrial average and the S&P 500 notched up gains of nearly 3 per cent. -- THOMSON REUTERS
