LONDON (AP) - European stocks rose Wednesday after a downbeat U.S. economic report fanned hopes that the Federal Reserve will lower interest rates in an effort to breathe life into the world's biggest economy.
The U.K.'s FTSE 100 Index gained 0.6 percent to 6,433.00, while France's CAC-40 Index climbed 0.9 percent to 5,690.77.
Germany's DAX Index added 0.5 percent to 7,804.15.
"It looks like the pressure is rising on the Fed to cut rates again and there are growing calls on the ECB and Bank of England to switch tack and cut rates, beyond the liquidity pump-priming they are currently engaged in to help the current credit squeeze in the money markets,'' said David Brown, chief European economist at Bear Stearns in London.
Orders for durable goods dropped by 4.9 percent in August, the largest drop in seven months, with widespread weakness signaling a slowdown in the U.S. industrial sector.
The report followed data released Tuesday that showed existing home sales stalled in August, and consumer confidence in September remains a worry.
"The U.S. equity market is also likely to take its cue from the Fed and be reassured by its assertive stance on policy. That we feel could help keep its underlying tone surprisingly firm,'' said Make Lenhoff, chief market strategist at Brewin Dolphin Securities in London.
Financial stocks led European markets higher. U.K. mortgage lenders paced the advance, with HBOS gaining 5.1 percent.
Goldman Sachs upgraded the stock to buy from neutral.
Speculation that a bid may be imminent for Northern Rock, the beleaguered U.K. mortgage lender, also helped boost sentiment.
Northern Rock jumped 11.6 percent, while Alliance & Leicester surged 3.4 percent.
Stock exchanges also rose, with shares in Sweden's OMX up 2 percent after a sweetened bid from Nasdaq and Borse Dubai.
Other exchanges benefited, with Germany's Deutsche Boerse rising 3.4 percent.
BMW had a 3.1 percent gain after reports that the company plans to target increased margins and sales with several new models.
Capgemini surged 5.9 percent following speculation that Atos Origin was again in the takeover spotlight.
Capgemini was trading 33 percent below highs reached in April before Wednesday's action.
CEO Paul Hermelin confirmed full-year targets, calming fears over the company's subprime risks.
Hennes & Mauritz, Europe's second-largest fashion retailer by sales, climbed 3.1 percent after reporting a third-quarter rise in net profits, and issuing upbeat views on September sales.
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