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. Last Updated: 07/27/2016

Markets Up, ERM Reentry Buoys Lira

LONDON -- The Italian lira, buoyed by re-entry into Europe's Exchange Rate Mechanism, strengthened Monday and briefly pushed through its new central parity rate of 990 lire per Deutsche mark.


European bourses traded bullishly, with Frankfurt and Amsterdam closing floor transactions at record highs. London ended only 19 points short of its intraday peak on the eve of the British budget.


After firming early in the day, the lira passed 990 to trade at 989.80 to the mark by late afternoon, although it eventually fell back below the parity level. Late Friday in Europe it was quoted at around 999.


"The lira is strengthening. Money is flowing out of the Deutsche mark, and this is having an effect on the dollar," said Elizabeth Legge, London-based economist at Bankgesellschaft.


And Roger Francis, senior analyst at IBJ International, commented: "Much of the dollar strength is still part of the lira-ERM effect which has hit the mark."


The dollar edged higher in late European trade, clearing the 1.52 marks barrier


In London leading stocks ended 36 points up as their momentum from Friday's dramatic rise followed through amid subsiding fears of an inflationary budget on Tuesday and after Wall Street nudged through its previous trading high.


The Dow opened weaker but soon continued its rally and was up 28 points at 6,499 when European trading closed.


"If the budget is tight the market will have a good run up to Christmas," one trader said. "Hopefully we will see a wise and prudent budget that will mean interest rates won't have to be used much more to simmer things down," another said.


On Friday the FTSE was propelled back through the key 4,000 level in its biggest one-day gain for 16 months, caused by a sharp turnaround in sentiment ahead of the budget.


In Frankfurt, German shares ended floor trading at a record high, just below the psychological 2,800 barrier. And in after-hours electronic trading the IBIS DAX index also nudged its previous trading peak, although it slipped back to close just below.


?Asian markets soared Monday, with Hong Kong and Australia shooting to record closes on Wall Street's lead.