European stocks are set to extend the previous session's rally on continued hopes of fresh stimulus measures in Europe and the Untied States despite the lack of fresh ECB action.
Investors keenly await Federal Reserve Chairman Ben Bernanke's testimony before the joint economic committee later in the day after Federal Reserve Bank of Atlanta President Dennis Lockhart said extending Operation Twist, which involves replacing short-term securities in the Fed's bond portfolio with longer-term securities in an effort to push already low long-term interest rates even lower, is an "option on the table."
The Bank of England's monetary policy committee will also meet later today, with analysts expecting the central bank to keep its key lending rate at a record low 0.5 percent and maintain its asset purchase target at 325 billion pounds.
Stimulus hopes boosted Asian stocks for a third day, the euro held firm against the dollar ahead of Spain's debt auction and commodities are edging higher, albeit posting modest gains. The Australian dollar climbed back towards parity with the greenback following surprisingly strong Australian employment data, which came a day after upbeat GDP data.
Closer home, the British manufacturing sector will likely undergo a 0.1 percent contraction this year after a sharp downturn last year, manufacturing organization EEF said. It also cautioned that the continued political and economic uncertainty in the eurozone and any possible deterioration in the European economy as a result, may impact significantly on U.K. manufacturers' confidence and prospects.
Meanwhile, Spain's Economy Minister Luis de Guindos rejected reports that his country has requested a European bailout for its troubled banking sector, and insisted that his government has a 'roadmap" to deal with the issue.
In economic releases, retail sales in the United Kingdom jumped 1.3 percent from a year earlier in May, the British Retail Consortium said - blowing away forecasts for a gain of 0.7 percent following the 3.3 percent contraction in April. Sales in food jumped in May, thanks to the arrival of good weather, while sales of large-ticket items remained subdued.
A separate report from the statistical office Insee showed that French jobless rate under the definition of International Labor Organization increased in the first quarter of the year, with the jobless rate in metropolitan France jumping to 9.6 percent in the first quarter from 9.3 percent in the previous quarter.
In corporate news, Royal Dutch Shell Plc confirmed that refining operations at its 79,000 barrel Clyde Refinery would stop from September 30. This follows an announcement in last July that the refinery would be converted into a dedicated fuel terminal.
European stocks rallied on Wednesday even as the European Central Bank resisted calls for a rate cut. Bank stocks were among the best performers after ECB President Mario Draghi said policy makers stand ready to act as the economy faces "increased downside risks."
The Euro Stoxx 50 index of eurozone bluechip stocks jumped 2.4 percent and the Stoxx Europe 50 index, which includes some major U.K. companies, rose 2.1 percent. Around Europe, Switzerland's SMI, the German DAX, the U.K.'s FTSE 100 and France's CAC 40 ended up between 1.9 percent and 2.4 percent.
U.S. stocks also rallied sharply overnight, recovering further from the sell-off seen in recent weeks, with optimism about further stimulus from the world's central banks underpinning sentiment. The Dow and the tech-heavy Nasdaq jumped 2.4 percent each, while the S&P 500 added 2.3 percent.
by RTT Staff Writer
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