European stocks advance on eurozone support statements

European stock markets posted more solid gains Friday as Germany and France backed up a staunch defence of the euro by ECB chief Mario Draghi and the US reported better than expected growth in the second quarter. London's benchmark FTSE 100 index rose 0.97 percent to close at 5,627.21 points as the focus in the British capital turned towards the start of the Olympic Games. The Paris CAC 40 jumped by 2.28 percent to 3,280.19 points, while Frankfurt's DAX 30 was 1.62 percent higher at 6,689.40. In Madrid the Ibex 35 index surged by 3.91 percent, while in Milan the FTSE Mib was up 2.93 percent. In foreign exchange deals, the euro traded for $1.2369, up from $1.2280 in New York late Thursday, after reaching a three-week high of $1.2377 in intraday deals. Equities had already surged on Thursday after European Central Bank chief Draghi pledged unconditional support for the euro, reassuring investors ahead of the bank's interest rate meeting in Frankfurt next Thursday. And if markets began to have second thoughts about Draghi's comments, the message was reinforced Friday by German Chancellor Angela Merkel and French President Francois Hollande who vowed in a joint statement to do "everything to protect the eurozone" after telephone talks. The French daily Le Monde reported that the ECB was preparing concerted action with eurozone governments "to save the euro." ETX Capital analyst Ishaq Siddiqi said that "European markets finally found some impetus to push higher toward the latter half the session today." He added that the the euro had regained ground against the dollar and that sovereign bond yields had eased further "on growing expectations that the ECB will finally comply with the markets' wish for QE," or quantitative easing. If so, the central bank would adopt policies used already by the US Federal Reserve and Bank of England to encourage economic activity by pumping cash into the financial system. In New York, US stocks advanced in midday trading on second-quarter economic growth data and encouraging earnings from Dow member Merck. The Dow Jones Industrial Average was up 0.82 percent at 12,993.69 while the S&P 500-stock climbed 1.11 percent to 1,375.14 and the tech-rich Nasdaq rose 1.29 percent to 2,930.68. Before the market opened, the US Commerce Department reported that the world's largest economy slowed to an annual growth of 1.5 percent in the April-June period. "That is lousy, but expectations had dropped so low that the spin is coming out as 'not too bad,'" said Dick Green at Briefing.com. Asian stock markets closed higher earlier and the euro held on to strong gains won overnight. Hong Kong shares rallied 2.02 percent, Tokyo climbed 1.46 percent, Seoul soared 2.62 percent and Sydney finished 1.50 percent higher. Looking ahead, European markets began to wonder about Italy's massive public debt of nearly two trillion euros. On Friday however, borrowing costs for both Italy and Spain dropped on public debt markets. The interest rate or yield on Italian 10-year debt dropped to 5.937 percent from 6.009 percent late on Thursday, while the equivalent Spanish issue fell to 6.658 percent from 6.828 percent. The drop in borrowing costs "is due to Mario Draghi's intervention, which arrived at just the right moment," Cyril Regnat, bond specialist with the French bank Natixis, told AFP. The next test for Italy will be a medium- to long-term bond sale on Monday, at which the treasury hopes to raise up to 4.75 billion euros in five and 10-year bonds. In Spain meanwhile, the unemployment rate rose in the second quarter to 24.63 percent and a huge 53 percent among the young, despite the start of the tourist season.