European markets gaining on rate cut prospect by the Fed (MarketWatch) (29-01-2008)

LONDON (MarketWatch) - European shares gained on Tuesday morning, powered by advancing financials and energy related stocks before the U.S. Federal Reserve starts a meeting to decide on its latest interest rate policy.

The pan-European Dow Jones Stoxx 600 index advanced by 0.7% to 321.02, with financials and miners performing well.

Among financial stocks, Societe Gιnιrale was rallying by 3.5%, and German lender Commerzbank, was gaining 1.9%, while shares in mining firms such as Lonmin, up 2.9%, rose amid hopes that lower rates would support economic growth.

Of national indexes, the U.K. FTSE 100 index rose 0.8% to 5,832.20, the German DAX 30 index advanced 0.5% to 6,854.40 and the French CAC-40 index moved up 0.8% to 4,886.87.

Wall Street finished the session higher on Monday led by financials, after the release of particularly weak housing market numbers, which further fueled hopes for another interest-rate cut by the Federal Reserve later this week.

The Fed starts its two-day meeting on Tuesday, with a decision announced after European stock markets have closed on Wednesday.

Some downbeat economic news emerged in Europe on Tuesday as well. France's consumer confidence indicator fell four points to a weaker-than-expected -34 in January, according to INSEE, the French statistical agency, on Tuesday.

Travel related stocks rose, with TUI Travel moving up 4.2% after it said integration is progressing well and raised its synergy target by 50% to 150 million pounds a year and encouraging current trading

Airlines were also getting a bit of a lift on Tuesday, pulling back from recent losses made amid ongoing worries about consumer spending, with shares of Ryanair up 1.6% and shares of British Airways up 2.7%.

Shares in insurer Prudential rose 2.2% after its annual new insurance business rose 21% to 2.87 billion pounds ($5.7 billion), as 44% growth in Asia and 19% growth in the U.S. offset a flat U.K. performance.

Also, ITV added 2.4% after a long-awaited ruling by the British government, which forced BSkyB to cut its stake in the commercial broadcaster to below 7.5% from 17.9%.

BSkyB shares edged up 0.3%. BSkyB is 39% held by News Corp., which owns MarketWatch, the publisher of this report.

Source: MarketWatch