Europe stocks extend rally after U.S. housing data
LONDON (MarketWatch) -- European stock markets broke a four-day losing streak on Wednesday, as buoyant U.S. housing data cheered investors, although the focus remained on the Thursday start of the European Union summit.
The Stoxx Europe 600 index (SXXP) jumped 1.4% to 245.87. Over the past four trading days, the pan-European index lost 2.8% as investor hopes faded that European leaders will agree on measures to contain the region's crisis when they meet on Thursday and Friday.
"Focus is on the summit because market participants are desperate for direction," said Richard Greenwood, fund manager at Bedlam Asset Management. "And those market participants want to know whether the European leaders are committed to doing something about the situation."
Major drug makers helped ensure a positive trading session for the pan-European index.
The broader European stock markets got a late-session boost from the U.S. where pending home sales climbed to the highest level in two years in May. Pending home sales climb to two-year high in May
U.S. stocks also started the day on a positive note.
Italian debt sales
In Italy, the FTSE MIB index (FTMIB) rallied 2.6% to 13,302.77, shrugging off results from a closely watched government debt auction.
The Treasury managed to sell the planned 9 billion euros ($11.2 billion) of six-month Treasury bills, but at sharply higher yields, suggesting that a longer-term bond sale on Thursday could be an expensive affair. Borrowing costs jump as Italy sells 6-month bills
The surge in borrowing costs for struggling euro-zone countries has recently stirred concern about the currency bloc's future and prompted talk of shared debt liabilities such as eurobonds.
French President François Hollande sees a move toward mutualizing euro-zone debt as a measure to bring down borrowing costs in countries like Spain and Italy, but the idea has been met with stiff resistance from German Chancellor Angela Merkel. The chancellor has in recent days expressed aversion toward eurobonds and said a common debt issuance at this stage would be "economically wrong," news reports said. Germany's Merkel: No quick fix for debt crisis
Issuance of shared debt will likely be discussed at the two-day EU summit starting Thursday, although most market participants don't expect any concrete agreements to emerge from the meeting.
"This has been true with most of the EU meetings over the last 18 months," said Greenwood from Bedlam Asset Management.
"Very few things are signed, sealed and delivered at these meetings, but markets have moved on the [developments] of the relations of the leaders," he added. "I think this one has particular relevance in that regard because of the uncertainty over the role and attitude of François Hollande and the imminence of a Greek default."
Ahead of the meeting, the Eurogroup finance ministers said in a statement that the Spanish government remains fully liable for the funds requested to help boost its ailing banking sector. Eurogroup: Spain to remain liable for rescue funds
Spanish stocks rose, with the IBEX 36 index (IBEX) closing 2.1% higher at 6,666.90.
Among biggest individual gainers in Europe, K+S AG (SDF) jumped 6.9% after Bank of America Merrill Lynch lifted the fertilizer firm to buy from underperform.
The bank further changed its recommendation on chipmaker
Elsewhere, U.K. banks were on the rise, helping lift the FTSE 100 index (UKX) 1.4% to 5,523.92.
Bucking the trend in London,
The CAC 40 index (PX1) closed 1.7% higher at 3,063.12.