Germany's DAX hits new record highs as European shares rise

[LONDON] Germany's DAX hit a record high as European stocks rose on Monday, extending their recent sharp rally as investors bet that the weakened euro would boost the region's economy and lift exporter earnings.

The DAX - which unlike many other European equity indexes factors in returns from dividends - rose 1.2 per cent to break through the 12,000-point level for the first time.

The pan-European FTSEurofirst 300 index rose 0.7 per cent to 1,589.57 points, its highest since late 2007.

The DAX and other European stock markets have been lifted by the European Central Bank's launch of a trillion euro money-printing scheme aimed at boosting economic growth in Europe.

The quantitative easing programme has weakened the euro and pushed bond yields to new historic lows, driving investors to seek the better returns available from the stock market.

Although the single currency recovered slightly on Monday, it has still lost about 25 per cent of its value against the US dollar since May last year.

"As the steroid injection of ECB QE continues to swell the DAX, as well as the other eurozone indices, investors remain enthralled with the region and seem committed to continuing its upswing," said Spreadex financial analyst Connor Campbell.

Siemens was one of the top performers on the DAX, rising 1.6 per cent to its highest level in around seven years after the German engineer won some Egyptian contracts.

Italian airport and highway caterer Autogrill and motorway operator Atlantia also hit record highs on expectations of higher passenger traffic after the announcement of a special Catholic church Holy Year.

Shares in Lafarge fell 4.2 per cent and Holcim dipped 1.3 per cent, however, as the two cement majors argued over the terms of their planned merger.

Irish construction rival CRH - which has agreed to buy assets from Lafarge and Holcim as they try to win regulatory approval for their planned merger - also fell 3 per cent.

Many investors were looking towards the US Federal Reserve's two-day meeting beginning on Tuesday.

After successive months of strong jobs data, expectations have been growing that the Fed will point towards a June rate rise. Those expectations have strengthened the US dollar, causing some investors to fret about the potential impact on US corporate earnings compared with those in Europe.

"While the lower euro helps boost European stocks, it really is the strong dollar that has been sending US shares lower. We could soon see analysts starting to forecast negative US earnings growth for 2015," said Mirabaud Securities' senior equity sales trader John Plassard.

REUTERS