European stocks extend gains on IMF pledge; DAX up 4.42%

Investing.com – European stock markets extended gains on Wednesday, as indications that the International Monetary Fund may buy euro zone bonds added to hopes that new measures are being considered to avoid debt contagion.

During European morning trade, the EURO STOXX 50 jumped 3.27%, France’s CAC 40 rallied 3.29%, while Germany’s DAX 30 climbed 4.42%.

European stock markets added to gains after the IMF indicated that it could buy Spanish or Italian bonds alongside the euro zone bailout fund, the European Financial Stability Facility, to help boost investor confidence in those countries.

Earlier in the day, the Financial Times reported that euro zone finance ministers were thinking of ways to recapitalize the region's struggling banks, signaling new efforts to support the struggling banking sector.

Banks led the bounce as shares in French lenders, which have high exposure to European sovereign debt continued to rally. BNP Paribas was up 5.83%, Credit Agricole shares rose 7.64%, while Societe Generale advanced 4.68%.

Shares in Italian lenders added to gains, amid speculation the European Central Bank was buying Italian government debt after ratings agency Moody’s downgraded Italy’s rating by three notches.

Unicredit shares rose 3.70%, while Intesa Sanpaolo added 3.88%.

Troubled French-Belgian lender Dexia saw shares climb 7.64%, having earlier gained as much as 10% after France and Belgium said a “bad bank” will be set up to hold its troubled assets.

Dexia shares have plunged nearly 30% in the past two sessions amid reports that the bank would be broken up.

In London, the commodity-heavy FTSE 100 continued to rise -% as shares in raw material producers led gains after oil and metal prices advanced on the New York Mercantile Exchange.

Mining giants BHP Billiton and Rio Tinto saw shares climb 5.31% and 5.34% respectively, copper producer Xstrata jumped 5.6%, while oil major British Petroleum rose 3.06%.

Shares in supermarket operator J. Sainsbury gained 3.24% after saying that that comparable sales in its fiscal second quarter rose 5.4%, above expectations for a 1.7% gain.

Homebuilders also contributed to gains after HSBC upgraded the sector to ‘overweight’. Taylor Wimpey shares rose 5.56% and Barratt Developments added 7.48%.

Elsewhere, U.S. equity markets pointed to a mixed open. The Dow Jones Industrial Average futures pointed to a rise of 0.59%, S&P 500 futures signaled an increase of 0.59%, while the Nasdaq 100 futures indicated a 0.06% drop.

Also Wednesday, data showed that the final euro zone services business activity index fell to 48.8 in September, a 26-month low, down from a preliminary estimate of 49.1.

Analysts had expected the index to remain unchanged in September.