LONDON—European stocks maintained small gains Monday but volumes were limited as many investors opted to defer taking new positions until the New Year.
The Stoxx Europe 600 index was recently up 0.4% at 277.33. London's FTSE 100 was 0.7% higher at 5854.32, Frankfurt's DAX added 0.3% to at 7027.62 and Paris's CAC-40 Index was up 0.8% at 3887.13.
Investors were emboldened by the People's Bank of China's decision not to raise interest rates over the weekend despite evidence of rising inflation, and took the chance to buy into equities, particularly basic resources.
"Markets had been expecting an interest-rate increase over the weekend, but this did not come, causing Asian markets and commodity prices to rally," noted Gary Jenkins, head of fixed-income research at Evolution Securities. He noted also that the government said its "priority was to maintain economic growth and to manage inflation."
That affirmation sent the price of base metals north. On the London Metal Exchange, the copper price broke its previous record of $9,091 a metric ton in early trade and continued a steady advance despite an initially firmer dollar.
However, the euro zone's sovereign-debt problems lingered in the background, with a European Union summit taking place later this week to discuss the details of the European Stability Mechanism.
"An important element of the current proposal is that the existing debt would become subordinated to European Union and International Monetary Fund loans," said BNP Paribas. "The impact of such a framework could be significant, suggested by S&P's decision to put Greek sovereign debt on negative watch. "The agency expects that further external support will be needed, hence lowering the creditworthiness of the existing debt that would become junior to the new loans. This something to watch."
Earlier, Asian stocks closed higher Monday, with the Sydney market supported by banking stocks' gains while shares in China rallied as investors were relieved that there was now more clarity on the monetary-policy front. Japan's Nikkei Stock Average increased 0.8%, Australia's S&P/ASX 200 gained 0.2% and South Korea's Kospi Composite added 0.5%. The Shanghai Composite index surged 2.9% while Hong Kong's Hang Seng index was up 0.7%.
Machinery and energy companies led a relief rally in China after Beijing said on Friday it will raise banks' reserve-requirement ratio by half a percentage point, the sixth such rise this year, as inflationary pressures strengthen. The increase will take effect on Dec. 20.
The reserve-requirement increase came ahead of Saturday's data showing inflation in November at 5.1%—the highest rate in two years—but Beijing avoided going down the path of raising interest rates as some had speculated.
In currencies, the euro strengthened after earlier gains for the dollar ahead of the Federal Reserve's policy-setting meeting later this week.
The euro traded recently at at $1.3242, up from $1.3228 late Friday in New York. The dollar was at 84.02 yen, up from 83.94 yen.
Spot gold was at $1,391.25 a troy ounce, up $5.15 from its New York close Friday. January Nymex crude-oil futures were up $1.11 at $88.90 a barrel.
