London - European stock markets closed higher yesterday, but trade was cautious on worries the US Federal Reserve might adopt a tightening bias in its monetary policy.
Markets turned around two days of losses after weaker than expected US housing start figures helped to allay fears that economic strength could spark higher rates. The Dow Jones industrial average was 0,5 percent up on the day when European markets closed, and by 1.30pm in New York it had held on to its gains, trading 57,5 points ahead at 10 910. Select names in the technology sector made some progress, but the broader market was tame.
In jittery London trade, stocks gathered 0,7 percent, relieved by Wall Street's overnight bounce. Allied Domecq, the food and drinks group, jumped 5 percent after it confirmed US investor Warren Buffett had accumulated a 2,2 percent stake in the company.
In Frankfurt, the Xetra DAX rose to a 1,15 percent stronger close as car maker DaimlerChrysler gained 2,9 percent on its forecasts of higher full-year sales. Hoechst climbed 4,2 percent after it confirmed on Monday a special dividend and a 5 percent share buy-back before its planned merger with Rhone-Poulenc.
In Paris, Rhone-Poulenc was 1,4 percent stronger. Overall, Paris stocks ended 1,5 percent up, bouncing back from two days of losses. France Telecom jumped 3,4 percent as investors switched from Deutsche Telekom because of tepid market support for the German company's plan to merge with Telecom Italia.
Asian markets were mixed. Singapore took its cue from Monday's government move to further liberalise the banking sector to post a 2 percent rise.