LONDON (ShareCast) - -Stocks rise on hopes for Chinese economy.
-Investor confidence rebounds in Germany.
-Automobile sector performing strongly.

FTSE-100: +0.65%
Dax-30: +1.82%
Cac-40: +1.4%
Ibex 35: +1.01%
FTSE MIB: +0.69%

The main European equity benchmarks have all closed the day higher on Tuesday following news that the People’s Bank of China (PBoC) had pumped $26.8bn into the Chinese economy through reverse repurchase operations.

Some observers believe that this activity heralds new measures to support the economy and, indirectly, stock prices.

The decision by the PBoC came on the back of relatively weak economic growth in China in the fourth quarter. Gross domestic product in the final quarter was 8.9% ahead of the equivalent period of 2010, but it slowed for a 10th consecutive quarter, paving the way for the stimulus announced today. Or so the thinking goes.

In Europe itself the European Financial Stability Facility (EFSF), the bail out fund designed to prop up the euro, lost its AAA credit rating from Standard and Poor’s last night, following the downgrade of one of its main backers, France.

The downgrade may have the effect of reducing the “firepower” of the EFSF to support the distressed euro area countries some fear.

For quite a few observers the alternative may be for the European Central Bank to start buying euro nation bonds in large numbers, a policy known as quantative easing. The Italian Prime Minister, Mario Monti, perhaps hinted at this today, asking Germany to “support Italy’s economy”.

The ZEW index of German investor confidence gained significantly in January, rising from minus 53.8 in December to minus 21.6 this month.

SECTORS

On the Stoxx 600 index the biggest gainers were automobiles and parts (+2.81%). The weakest performer was food and beverage (-0.07%).

COMPANY NEWS

German retailer Metro’s fourth quarter sales numbers came in below forecasts, but the company reiterated guidance, sending its shares 3.8% higher by the close.

Daimler AG, the owners of Mercedes Benz, gained 3.8%, possibly on the news of the easing of Chinese monetary policy. BMW was also up 3.2%. Positive broker comments are also part of the explanation.

The biggest gainer in Frankfurt however was HeidelbergCement, up 5.3%, while its French rival Lafarge gained 3.9% in Paris.

In other French equity news, the biggest gainer on the CAC 40 was Schneider Electric, up 5%.

Car makers also did well on the Paris Bourse, with Renault making it into the top five gainers' list by putting on 2.6%

In Italy, the troubled bank Unicredit led the risers, up 2.8%

MACROECONOMY

The Eurozone consumer price index for the month of December fell back to 2.7%, from 3.0% in November.

OTHER MARKETS

Front month futures contracts for Brent crude had dropped 0.13% by 4:55pm in London, to hit $111.19 per barrel.

The Euro gained 0.62% against the dollar to trade at $1.2770 by 6:11pm in Frankfurt

BS

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