European stocks edge up, oils offset weak miners

PARIS - European shares tiptoed higher by midday on Friday, helped by firm energy stocks, but Beijing’s surprise interest rate rise hit basic materials producers amid worries that slower Chinese economic growth would cap demand for metals.

By (Reuters)

Published: Fri 18 Aug 2006, 6:10 PM

Last updated: Sat 4 Apr 2015, 2:18 PM

BP and Royal Dutch Shell rose more than 1 percent as worries over Iran’s nuclear row with the West resurfaced, pushing crude oil prices back towards $71 a barrel.

A 3 percent jump in BAE Systems shares, after the British defence company won part of a record 6 billion pound ($11.4 billion) export agreement for the Eurofighter Typhoon combat jet, also helped to offset weakness in technology stocks.

By 1115 GMT, the pan-European FTSEurofirst index of 300 leading shares was up 0.1 percent at 1,362.2 points, little changed for the second consecutive session after tame U.S. inflation data and a sharp drop in oil prices helped the index rally 2 percent in the first three days of the week.

News that China had raised one-year rates by 27 basis points, the second hike in four months, briefly unsettled investors.

Many analysts said Beijing’s effort to slow a boom in credit and investment raised the risk of a hard landing that would deprive the global economy of a strong source of growth, just when the U.S. economy was itself showing signs of weakening.

“The timing is a surprise but the tightening move is not, and China seems to be raising rates very progressively,” said Valerie Plagnol, economist at CIC Securities. “Now, will this be enough? Not necessarily, as real rates still remain quite low.”

“Markets have no doubts about China’s determination to continue raising rates, but there are clearly worries about their (China’s) ability to cool off the economy and not lead to a hard landing,” Plagnol added.

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