European markets rise on UK fiscal U-turn hopes; Stoxx 600 up 1.5%

European markets jumped on Friday as speculation abounded that the U.K. government could be about to U-turn on its controversial fiscal policies.

TICKER	COMPANY	NAME	PRICE	CHANGE	%CHANGE	VOLUME
.FTSE	FTSE 100	*FTSE	6921.09	70.82	1.03	97893666
.GDAXI	DAX	*DAX	12476.23	120.65	0.98	12973514
.FCHI	CAC 40 Index	CAC	5938.92	59.73	1.02	11676458
.FTMIB	FTSE MIB	*FTSE MIB	21008.76	222.94	1.07	78376235
.AEX	AEX Amsterdam Index	AEX	637.97	4.96	0.78	14488374
.IBEX	IBEX 35 Idx	*IBEX 35	7446.1	97.3	1.32	37456605

The pan-European Stoxx 600 climbed 1.7% in early trade, with basic resources adding 2.7% to lead gains as all sectors and major bourses entered positive territory.

Finance Minister Kwasi Kwarteng flew home early from the International Monetary Fund in Washington on Thursday night as ministers convened to address the nation’s economic chaos.

Reports on Thursday suggested the government could scrap the £43 billion ($48.6 billion) of unfunded tax cuts included in its so-called “mini-budget” on Sep. 23, sending stocks and the pound surging.

Thursday was a wild ride for global markets, as an initial plunge following a hotter-than-expected U.S. inflation report gave way to a 1,500-point swing on Wall Street that led the Dow to close 800 points higher.

Markets in Asia-Pacific then rallied overnight as investors seemingly shook off the inflation report and instead focused on hopes for a U.K. fiscal U-turn and further stimulus from the Chinese government.

U.S. stock futures were higher in early premarket trade on Friday as investors await a slew of corporate earnings from the country’s biggest banks.

The Bank of England on Friday will end its temporary purchases of long-dated U.K. government bonds, a support mechanism launched two weeks ago to stabilize the gilt market and rescue pension funds in the wake of the government’s fiscal announcements.

Stocks on the move: Virgin Money up 5%, Temenos down 19%

Virgin Money shares gained 5.4% in early trade to lead the Stoxx 600, while Swiss software company Temenos plunged more than 19% after issuing a profit warning.

– Elliot Smith

Here are the opening calls

Britain’s FTSE 100 is seen around 77 points higher at 6,927, Germany’s DAX is set to jump by around 212 points to 12,568 and France’s CAC 40 is expected to add around 96 points to 5,975.

— Elliot Smith

CNBC Pro: Could the British pound hit parity with the dollar? Here’s what the bulls and bears say

The British pound has whipsawed in the past month. First, it fell to an all-time low against the U.S. dollar after the U.K. government announced its “mini-budget.” Now, it is at its highest level in a week on reports of a possible major U-turn in government spending plans.

Early Friday, it had ticked lower to trade around $1.131.

Where will it go next?

The median forecast of 22 analysts compiled by CNBC depicts significant sterling weakness in the short-term.

— Ganesh Rao

Source : CNBC