GLOBAL MARKETS: European Stocks Mostly Higher; Mood Bullish





European stocks were mostly higher Thursday, with market participants turning their focus from the doom and gloom of the euro zone's finances to this year's solid gains by the major global indexes.

"The bull case for equities is winning the battle at the moment, even though reading many headlines at the moment you'd be right to think that sentiment was at all-time lows and markets were falling," said Simon Denham, head of Capital Spreads in London.

All the indexes seem to be heading higher, with Asian stocks putting in modest gains early Thursday and U.S. markets closing at their second-highest level of the year Wednesday, said Denham, noting that investors are opposing the trend, "but not as much as we would expect when markets are at their highs, so maybe this time there's a feeling that the trend is your friend."

By 1200 GMT, the Stoxx Europe 600 index was up 0.2% at 275.61. Among the benchmark indexes, London's FTSE 100 was up 0.3% at 5812.07, Frankfurt's DAX index was down 0.1% at 6966.36 and Paris's CAC-40 index was 0.5% higher at 3851.87.

Optimism that the global economy remains on track, and a double dip can be avoided given the strength of recent economic and corporate data, pushed cyclical stocks--which outperform in periods of economic optimism--sharply higher, with financial stocks among the top performers. Traders said market participants appeared comfortable to take on more risk as the euro-zone debt situation was being tamed by policymakers and authorities. The Stoxx Europe 600 insurance sector added 2.0%, while the Stoxx Europe 600 banks index rose 1.3%.

Moreover, if the authorities continue to control extreme systemic risks, then the outlook for global markets is actually quite rosy, said Deutsche Bank. "We are still in the early stages of the cycle by historical standards and corporate balance sheets remain robust. Corporate non-financial credit remains far removed from the epicenter of this crisis," it added.

Still, traders said the markets remain cautious, citing news that Fitch Ratings has downgraded Ireland's debt rating by three notches to BBB+. Additionally, expectations of a further tightening of monetary policy by China, perhaps as soon as the coming weekend, has worried market participants, as they anticipate that China--which has a history of announcing tightening measures outside market hours--may announce a rate hike before the release of inflation data for November on Monday.

Meanwhile, the Bank of England left interest rates on hold at 0.5%, while the asset-purchase total was also left at GBP200 billion.

In the U.S., investors will watch for the release of initial jobless claims data at 1330 GMT, particularly after last week's surprise jump in claims, said Credit Agricole CIB. "The data will give clues as to whether this was a mere aberration or more worryingly a change in trend," it said. U.S. wholesale inventories are also scheduled for release at 1500 GMT.

Ahead of the U.S. economic data, the December Dow Jones Industrial Average future was up 0.3% at 11,402, and the December S&P 500 contract was up 0.3% at 1232.70.

In Asia, stock markets ended mostly higher Thursday, with shares in Sydney powering to a four-week high after the strong employment report. However, the China market was hobbled by concerns about an imminent rate hike from Beijing, after the People's Bank of China halted the sale of three-year bonds.

Japan's Nikkei Stock Average ended up 0.5% and South Korea's Kospi Composite rose 1.7%. Hong Kong's Hang Sang Index was higher by 0.3% but the Shanghai Composite index was off 1.3%.

In the European foreign exchanges, the euro eased back after initially gaining ground against the dollar. By 1215 GMT, the euro was trading at $1.3215, down from $1.3262 late Wednesday in New York. Elsewhere, the dollar was at Y84.05, up from Y84.03.

Among commodities, spot gold was at $1384.95, per troy ounce, up $2.90 from New York, while January Nymex crude oil futures were up 28 cents at $88.56 per barrel. In the bond markets, the March bund futures contract was up 0.45 at 124.84.