- US debt ceiling compromise expected
- Yellen nominated as new Fed Chair
- BoE keeps monetary policy unchanged
FTSE 100: 1.46%
CAC 40: 2.21%
FTSE MIB: 1.54%
IBEX 35: 2.24%
Stoxx 600: 1.68%
European stocks rose on reports of a possible compromise between US political parties on the debt ceiling.
House Republican and Senate Democratic leaders were said to be working on a deal to increase the borrowing limit in the short term to avoid a debt default.
Congress has until October 17th before hitting the $16.7trn debt ceiling and running out of cash to pay its bills.
"All this essentially means is that negotiations will be delayed by a couple of months, at best, and we'll be back in the same situation again come Christmas," Craig Erlam, Market Analyst at Alpari, said of the reported compromise deal.
"Unfortunately though, under the circumstances that is a positive thing, not just for the financial markets but the global economy, which would suffer hugely if the US was forced to default on its debt."
The US government has been in shutdown for 10 days since missing last Monday's deadline for a budget deal as lawmakers continue to wrangle over President Barack Obama's controversial healthcare bill and raising the debt limit.
US Treasury Secretary Jack Lew warned Congress today that debt default would could have serious repercussions for the economy. He said the Treasury payments systems were not designed to work without funds for payment.
"The United States should not be put in a position of making such perilous choices for our economy and our citizens. There is no way of knowing the irrevocable damage such an approach would have on our economy and financial markets," Lew said before the Senate finance committee.
Turning to a more positive development in the world's largest economy, Obama has nominated Janet Yellen as new Federal Reserve Chair to replace Ben Bernanke next year.
Yellen, who has supported the Fed's stimulus programme, was a widely expected and favoured choice among investors.
The Fed yesterday released the minutes from last month's meeting which showed it was a close call in the central bank's decision to maintain its $85bn per month in bond purchases.
The central bank is holding out for a greater recovery in the economy and jobs market before it begins tapering. It is now not expected to announce a tapering until the end of the year, though the ongoing shutdown of the US government could mean that the taper will be pushed out into 2014.
The government shutdown has also been blamed for a spike in US weekly initial jobless claims last week.
According to Capital Economics: "The jump in US weekly initial jobless claims to 374,000 last week, from 308,000, was largely due to a backlog of claims linked to an IT upgrade in California and a wave of private sector temporary layoffs triggered by the Federal government shutdown."
Bank of England maintains policy
The Bank of England (BoE) decided hold its interest rate at 0.5% and the asset purchase programme at £375bn.
The move came as no surprise, particularly since the central bank has vowed to maintain the key rate at a record low until the unemployment rate falls from its current level of 7.7% to 7%.
The European Central Bank (EC), on the other hand, is expected to unveil new liquidity measures at its next policy announcement, according to economists.
About three in four of economists predict President Mario Draghi will reveal new liquidity measures such as longer-term refinancing operations, surveys by Bloomberg showed.
The majority of forecasters also say interest rates will remain unchanged through the first half of 2015.
Separately, the ECB and the People's Bank of China (PBC) have established a bilateral currency swap agreement "in the context of rapidly growing bilateral trade and investment between the euro area and China, as well as the need to ensure the stability of financial markets".
The swap agreement will be valid for three years and have a maximum size of 350bn yuan when yuan is provided to the ECB and €45bn when euros are provided to the PBC.
Hays rose after the UK recruitment agency posted a 2% rise in first-quarter net fees compared to last year on a comparable basis.
Givaudan declined after the fragrance maker reported third-quarter sales that missed estimates.
Tryg rallied after the Nordic property and casualty insurer reported third-quarter pre-tax profit of 907m kroner, compared to the forecast for 885m kroner.
Ladbrokes gained after an undisclosed buyer bought a stake in the UK bookmaker, The Telegraph reported.
CGG advanced after the oilfield surveyor posted a 94% increase in third-quarter vessel production.
Arkema jumped after UBS raised its rating on the French chemicals maker to a 'buy' from 'neutral'.
Brent crude edges higher
Brent crude futures climbed $2.065 to $111.320 per barrel on the ICE.
The euro rose 0.09% to the 1.3536 US dollar.