European stocks advance despite disappointing earnings

European equities advanced on Wednesday while the yen rose against the dollar amid uncertainty surrounding Tuesday's Group of Seven (G7) statement on foreign exchange volatility.

London's FTSE 100 index of leading companies gained 0.33 percent to 6,359.11 points, closing at its highest level since May 19, 2008.

Frankfurt's DAX 30 rose by 0.67 percent to 7,711.89 points, and in Paris the CAC 40 climbed by 0.32 percent to 3,698.53 points.

"European markets have managed to maintain a positive tone despite some disappointing earnings announcements from across Europe," said CMC Markets UK analyst Michael Hewson.

In foreign exchange activity, the dollar dipped to 93.43 yen compared with 93.47 yen late in New York on Tuesday. The euro fell to $1.3448 from $1.3454, and also fell against the yen.

Gold prices dipped to $1,645 an ounce from $1,647.50 on the London Bullion Market on Tuesday.

Markets were hit on Tuesday after the G7 warned that "excessive volatility" in exchange rates hurt economic and financial stability, as it sought to avoid talk of a so-called "currency war" before this week's G20 gathering in Moscow.

However, the statement sparked uncertainty after an unnamed G7 official was quoted as saying that the statement was aimed at Japan. British officials reportedly insisted that it did not concern any individual nation.

Japan's recent monetary easing which has pushed down the yen, has stoked concerns, especially in Europe, of a "currency war" between the major economies as policymakers seek to devalue their currencies to make exports more competitive.

"The G7 statement released yesterday should serve as a reminder that commenting on foreign exchange rates invariably leads to the very thing the authorities wish to avoid -- excessive volatility," said analyst Derek Halpenny at Bank of Tokyo-Mitsubishi UFJ in London.

"The now standard opposition to 'excessive volatility and disorderly movements in exchange rates' was expressed as usual in the statement but it also included the added commitment that domestic and fiscal policies would be oriented to domestic objectives and 'that we will not target exchange rates'.

"This essentially served all countries at the table. Japan could state they have the green light for pursuing monetary and fiscal policies to tackle deflation -- but we think far more importantly other countries received reassurances that Japan would not explicitly target the yen in achieving this objective."

The G7 statement came just days before G20 talks that will seek to address growing fears of a currency war in which nations carry out devaluations to make their exports more competitive.

Markets will also be watching a two-day Bank of Japan (BoJ) policy meeting, which wraps up Thursday, and whether policymakers unveil fresh easing measures.

Rabobank analyst Jane Foley said the episode had merely served to underline divisions within the G7 that comprises Britain, France, Germany, Italy, Japan, the United States and Canada.

-- "No change" in Japan's position --

"The efforts made by the G7 ... to calm fears of currency wars has instead hinted that there may be a diversity of opinion within the G7 on the topic of exchange rates," Foley noted.

"While we have now been told that the G7 wished to signal concern about the excess moves in the yen, with the exception of verbal intervention and closed doors meetings, is it unlikely that any policy measures can be taken to counter it."

In earlier Asian deals, Sydney stocks hit a near three-year high, but Tokyo sank on profit-taking and as the yen picked up strength.

Sydney jumped 0.90 percent to 5,003.7 points -- closing above the 5,000-point mark for the first time since April 2010.

But Japanese shares dived 1.04 percent after surging the previous day. Hong Kong, Shanghai and Taipei were closed for public holidays.

Tokyo rejected claims it was trying to force down the yen, saying the new conservative government's big spending and pressure on the central bank for aggressive easing was designed to stoke growth.

"There is no change in Japan's position," Finance Minister Taro Aso told reporters.

"Japan's new government is carrying out monetary policy and economic policy appropriately in order to pull out of a long-running, deflation-induced downturn. There is nothing more to say."

In European corporate action, shares in Peugeot Citroen soared by over seven percent to 6.40 euros in late afternoon trade, despite the French automaker reporting a record loss of 5.0 billion euros.

US stocks were mixed in midday trade, with the Dow Jones Industrial Average down 0.41 percent to 13,961.16 points.

The S&P 500, a broad measure of the markets, slipped 0.06 percent to 1,518.52 points, while the tech-rich Nasdaq Composite edged up 0.09 percent to 3,189.44 points.

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