European Stock Markets Rally Amid Hopes of Federal Reserve Action, Despite Sovereign Debt Concerns

European stock markets experienced a significant rally in the last trading day of August 2011, with the Stoxx Europe 600 index jumping 2.9% to close at 237.43. This marked the third consecutive gain for the index, despite concerns over a double-dip recession and euro-zone finances. The rally was driven by hopes that the Federal Reserve would take action to support the US economy, as well as efforts by euro-zone politicians to reassure investors about the sovereign debt crisis.

Key Takeaways:

The Stoxx Europe 600 index rose 2.9% to close at 237.43, marking the third consecutive gain for the index.
Deutsche Telekom slumped 7.6% after the US Justice Department moved to block the proposed sale of its T-Mobile USA unit to AT&T.
Efforts by euro-zone politicians to reassure investors about the sovereign debt crisis supported share prices.
Germany's cabinet approved a draft for legislation to widen the scope and volume of the euro zone's current rescue fund.
Finnish Prime Minister Jyrki Katainen noted that a collateral deal between Finland and Greece which is acceptable to other euro-zone countries is expected to be ready within a few days or weeks.
Investors had fretted that Finland would veto a deal to provide fresh aid to Greece without some form of collateral.
U.S. stocks also climbed, aided by three batches of economic data, including a report by Automatic Data Processing showing a gain in private-sector hiring this month.
A separate release on Chicago-area manufacturing beat expectations, raising hopes for a national reading due Thursday.
A third batch of data showed U.S. factory orders for July rose more than expected by economists.
European benchmarks were also lifted by the minutes of the last Federal Reserve policy-setting meeting, revealing that a third round of asset purchases was raised as a possibility to support the economy and financial markets.

Statistics:

The Stoxx Europe 600 index rose 2.9% to close at 237.43.
The index still slumped 10% in August amid worries over a double-dip recession and euro-zone finances.
Deutsche Telekom fell 7.6% in Frankfurt after the Justice Department sued to block AT&T's planned $39 billion acquisition of T-Mobile USA.
Shares of Bouygues jumped 16% after the group said it plans to repurchase EUR1.25 billion of its shares at a 30% premium to Tuesday's closing price.
The Swiss franc surged against the dollar and euro on Wednesday, as disappointment over a government economic package converged with growing frustration with the Swiss National Bank's lack of concrete measures to weaken the currency.
The dollar fell to CHF0.8046, down from CHF0.8200 late Tuesday in New York.
The euro traded at CHF1.1590, from CHF1.1843.
The euro also stood at $1.4407, down from $1.4442, and the dollar was at Y76.15, down from Y76.74.

Sources:

Dow Jones Commodities News Select via Comtex
Ishaq Siddiqi contributed to this article.