Aussie rates cut provide tonic for stock markets

The FTSE 100 index has hit its highest level since December 2007, buoyed by a cut in Australian interest rates, some better-than-expected German factory output data and the afterglow from last week's decent US jobs report.

The blue-chip index closed up 0.55 per cent at 6557.3. The Australian central bank cut its refinancing rate a quarter point to a record low of 2.75 per cent as policymakers responded to signs of a slowdown in the commodities-powered economy.

This followed a similar cut in the European Central Bank's interest rate to 0.5 per cent last week. Germany's Dax index hit a record high after industrial orders rose 2.2 per cent in March on the previous month.

Brenda Kelly, a senior market strategist at IG, said some residual momentum from last week's decent US jobs figures, which showed employment rising by 165,000 in April, had also helped boost stock prices in Europe. Last week the S&P 500 index of leading US shares broke through 1,600 for the first time in its history.