LONDON, April 29 — European stocks rose today, lifted by well-received corporate earnings and merger and acquisition activity as investors pushed mixed signals on the policy outlook of the European Central Bank and the crisis in Ukraine onto the back burner.

Investors also digested the latest European bank “stress tests”, a beefed-up set of rules stipulating that 124 of the continent’s top banks must be able to survive simultaneous routs in bonds, property and stocks.

Equities drew initial support from the GfK index of German consumer confidence holding at a multi-year high of 8.5 heading into May, as well as earnings reports from Finnish telecom giant Nokia and German chipmaker Infineon.

Nokia shares jumped more than 7 per cent after it unveiled plans to return US$3.1 billion (RM10.1 billion) to shareholders via buybacks and extra dividends, while Infineon rose more than 5 per cent after second-quarter profit topped estimates.

The equity-friendly tone to markets today was helped, if not driven, by figures that showed Britain’s economy grew at a solid 0.8 per cent pace in the first quarter, giving an annual rate of growth of 3.1 per cent, the fastest since 2007.

“Investors are waiting to see the start of some positive earnings momentum, which has been missing in recent years,” James Butterfill, global equity strategist at Coutts, said. “Any sign of a positive momentum is likely to support share prices.

“We are also witnessing the biggest indicative M&A activities since the credit crisis, highlighting that corporate confidence is improving,” he added.

At 1130 GMT the FTSE Eurofirst 300 index of leading European shares was up 0.8 per cent at 1347 points and Germany’s DAX was up 1.2 per cent at 9558 points.

Britain’s FTSE 100 index was up 0.7 per cent at 6747 points and France’s CAC 40 up 0.4 per cent at 4478 points, while European bank stocks outperformed the broader index by around 2:1.

In Asia, the MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.2 per cent, but US stock futures pointed to a higher open of 0.3-0.5 per cent on Wall Street.

Pressure on ECB to ease?

Currencies and bonds investors took their cues more from the mixed signals on whether the ECB will ease policy in the coming weeks and months to fight off the threat of deflation.

The deflationary forces were intensified by figures that showed euro zone bank lending to the private sector contracted yet again in March, and overnight money market rates rose to the highest level this year as banks continued to pay down cheap ECB loans taken out at the height of the crisis.

But European Central Bank president Mario Draghi told German lawmakers yesterday that further monetary easing in the form of bond-buying remained some way off, and the ECB pumped more liquidity into the market today through its weekly money market operations.

“Money market developments are putting more pressure on the ECB,” said Jan von Gerich, chief fixed income strategist at Nordea in Helsinki. “If rates don’t come down, the ECB is bound to do something.”

The rise in overnight money rates to 0.4 per cent helped support the euro, which rose as high as US$1.3878. At 1130 GMT it was little changed on the day at US$1.3858.

German inflation data later today is expected to show an increase in April, ahead of euro zone figures tomorrow, which are expected to rise to a still-low 0.8 per cent from a multi-year trough of 0.5 per cent. The dollar index, a measure of the greenback’s value against a basket of currencies, was flat on the day at 79.66, and sterling was also little changed at US$1.6810, coming off the high immediately after the Q1 GDP figures.

Political news from Ukraine continues to unnerve investors, but not enough to divert their cash out of riskier assets such as stocks and into safer-haven government bonds. The European Union said today it imposed sanctions on 15 Russian political and military leaders, including a deputy prime minister. This followed action from the United States against Russian individuals and firms yesterday.

On the economic front, the Federal Reserve begins a two-day policy meeting today, which is expected to result in the continued paring back of its bond-buying stimulus.

In commodity markets, Brent crude oil was up 0.5 per cent at US$108.64 a barrel, US crude was up 0.6 per cent at US$101.45 a barrel and gold was down 0.5 per cent at US$1,289.80 an ounce. — Reuters