European stocks rallied today as investors applauded a debt deal to avoid a US default, but gains were capped as a number of market players doubted it would help the world's biggest economy avoid a credit downgrade.
Global bank HSBC was the top gainer among European blue chips, surging 4.8 per cent after posting a surprise rise in first-half profit.
At 11.15am, the FTSEurofirst 300 index of top European shares was up 0.8 per cent at 1,090.42 points after losing 2.4 per cent last week, while the euro zone's blue chip Euro STOXX 50 index was up 0.7 per cent at 2,688.18.
David Thebault, head of quantitative sales trading, at Paris-based broker Global Equities, said it was good news that default would be avoided.
"The bad news is the deal, which looks more political than economic, falls short of what credit agencies have been hoping for,” he said.
“A credit downgrade isn't justified at this point, but the sword of Damocles is still there and if growth figures remain sluggish, this sword might fall."
US stock index futures surged more than 1 per cent on the back of the news.
However, the dollar hit a record low against the safe-haven Swiss franc on today, reversing earlier gains on investor concerns that the deal would not be enough to avoid a downgrade to the country's triple-A credit rating.
Reuters
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