European stocks were buoyed Monday by another positive German business confidence report and a strong US opening but Spain suffered on growing concerns over its debt after the government suffered a surprise poll setback.
Dealers said Spain was already causing concern after missing its public deficit target badly last year and news of the government's election setback stirred worries further as voters rejected its tough austerity policy.
They said a fractional gain in the Ifo German business confidence report suggested that Europe's powerhouse economy might be losing some momentum but it still continued ahead of the pack.
US shares opened strongly after Federal Reserve chairman Ben Bernanke said a still-weak US job market meant the central bank would likely keep its easy money policy, a stance which undercut the dollar.
In mid-afternoon trade, London's benchmark FTSE 100 index of top shares rose 0.70 percent and Frankfurt's DAX 30 gained 1.15 percent while in Paris the CAC 40 was up 0.48 percent.
Madrid's Ibex 35 index was down 0.84 percent, but off early lows posted after Spanish Prime Minister Mariano Rajoy's right-leaning Popular Party surprisingly failed to win elections in the southern region of Andalusia.
In Milan, the market was up 0.54 percent as investors continued to favour Italy over Spain.
In New York, the blue-chip Dow Jones Industrial Average was up 0.76 percent at around 1400 GMT while the tech-rich Nasdaq Composite added 0.85 percent.
"We cannot yet be sure that the recent pace of improvement in the labor market will be sustained," Bernanke said in a speech.
"Further significant improvements in the unemployment rate will likely require a more-rapid expansion of production and demand from consumers and businesses, a process that can be supported by continued accommodative policies."
In foreign exchange trade, the European single currency came off its lows to trade higher at $1.3314, up from $1.3268 in New York late Friday.
There was some tension on the bond markets driven by concerns over Spain and this kept shares in check early in the day but the firmer start on Wall Street then encouraged Europe to press ahead.
The markets brushed off the Ifo data and concentrated on eurozone bond yields and Rajoy's failure to gain a majority in Andalusia, said research director Kathleen Brooks at trading site Forex.com.
"After signs of stabilisation in this crisis, we are now back to uncertainty," she told AFP.
"The markets are likely to remain jittery this week until we hear how the eurozone's firewall will be increased, if the increase will be permanent.
"However, what the market really wants to hear is how committed all of the eurozone countries are to boosting the firewall to stop contagion spreading to Spain and Italy."
Dealers also digested a warning by ECB executive board member Benoit Coeure that it was essential that the European Central Bank wind down its fire-fighting role in the debt crisis as soon as it can.
"A timely exit from non-standard measures and a return to a less accommodative stance -- once the economic conditions are ripe -- are essential," Coeure said.
"Monetary policy accommodation for prolonged periods of time might fuel excessive risk-taking, leverage and asset price bubbles," Coeure argued.
Asian markets were narrowly mixed on Monday, with Tokyo virtually unchanged.
Source: AFP Global Edition
