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DAX joins world stocks surge

May 7, 2013

Robust results from heavyweight banks have driven European shares to fresh peaks, with Germany's top DAX share index rising to a record high. Reduced interest rates are seen as the prime mover.

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Bull figures are pictured in front of the German share price index DAX board at the German stock exchange in Frankfurt (Photo: REUTERS/Lisi Niesner)
Image: Reuters

The DAX ended up 0.9 percent at a record closing high of 8,181.78 points, having hit the highest level in its 25-year history earlier in the day. Shortly after lunch the index stood at 8,195.

The previous high of 8,151.57 was set on July 13, 2007.

The top German share index had been flirting with record territory for a few days, having logged a close-of-trade all-time record of 8,122.29 on Friday in Frankfurt.

One of the key factors pushing the index up was a decision by the European Central Bank (ECB) on Thursday to return to the record-low base interest rate of 0.5 percent, from 0.75 percent. As well as boosting confidence among businesses, who hoped it might prompt banks to lend more readily, the move also nudged investors towards the markets.

The base interest reduction suggested that the already negligible returns on savings at the banks would remain low for the foreseeable future, prompting people to look to stocks for gains instead. The German market, as with many around the world, took a big hit during the recession that followed the financial crisis and has been fighting to return to its record levels set before the crash in the summer of 2007.

Not just Germany

The pan-European FTSEurofirst 300 index closed up 0.3 percent, its highest level in about five years. The eurozone's blue-chip Euro STOXX 50 index also advanced 0.7 percent to its highest close in roughly two years and is up 5 percent since the beginning of 2013.

Late Tuesday, the US stock market joined the global rally as the Dow Jones industrial average continued to hover around the 15,000 mark. Indexes in the United States also rose in response to good news about central bank stimulus and the German economy. The Dow and broader Standard & Poor's 500 index are trading at record levels, driven by optimism that the US economy continues to recover and as the Federal Reserve maintains its stimulus program.

On Friday, the Dow passed 15,000 after the US government reported a sharp employment pickup in April. The index has risen 14.6 percent this year. Over 80 percent of companies in the S&P 500 index have reported first-quarter earnings, and profits have reached a record level.

Stocks also surged in Japan. The Nikkei index has recently begun trading above 14,000 for the first time in nearly five years.

mkg/ccp (AFP, Reuters, AP)