LONDON, England — European and US stock markets rose strongly yesterday as a solid start to the US corporate earnings season from aluminum company Alcoa Inc helped investors look past a credit rating downgrade of Portugal.

In Europe, the FTSE 100 index of leading British shares closed up 104 points, or two per cent, at 5,271.02 while Germany’s DAX rose 113.94 points, or 1.9 per cent, to 6,191.13. The CAC-40 in France ended 70.10 points, or two per cent, higher at 3,637.76.

On Wall Street, the Dow Jones industrial average was up 168.20 points, or 1.7 per cent, at 10,384.47 around midday New York time while the broader Standard & Poor’s 500 index rose 18.02 points, or 1.7 per cent, at 1,096.77.

The main reason behind the gains was better than anticipated earnings from Alcoa, which traditionally kicks off the earnings season. In an after-hours statement Monday, Alcoa revealed that its second-quarter earnings per share of 13 cents — two cents better than expected in the markets.

“Those upbeat earnings from Alcoa last night certainly seem to have set the pace amongst equity traders who once again seem convinced that this latest rally still has legs,” said Will Hedden, senior sales trader at IG Index.

A slew of American companies release quarterly results in the coming weeks and Alcoa’s result spurred hopes that the earnings season will provide reassuring signs of recovery in the world’s biggest economy. Chipmaker Intel Corp. reports earnings after the close Tuesday. The company is considered a gauge of the health of the economy since its sales are driven by consumers and businesses buying computers.

Also supporting sentiment was the news that Greece, the most indebted of eurozone economies in terms of its borrowing relative to economic output, tapped the markets for the first time since its euro110 billion bailout in May from its 15 partners in the eurozone and the International Monetary Fund.

The auction of euro1.625 billion (US$2.04 billion) in six-month Treasury bills went smoothly and the interest rate the Greek government had to pay of 4.65 per cent was lower than many in the markets were anticipating.

“The sale will come as a relief to the Greek and eurozone authorities,” said Jane Foley, research director at Forex.com.

Investors were seemingly little worried by Moody’s Investor Services’ downgrade of Portugal. The agency cut its rating on Portugal by two notches to A1 amid concerns over the country’s financial strength over the medium term in light of waning growth prospects.

Diego Iscaro, a senior economist at IHS Global Insight, said the move was not a surprise as Moody’s had put the rating under review in May and its rating was the lowest given by a major credit agency.

“This may help to explain why the markets’ reaction to this downgrade has been tame so far,” said Iscaro.

Earlier, confidence in Asia had also been dented by a tumble in Chinese stocks, following the news that property prices have fallen for the first time in 18 months — a sign that government tightening measures are having an effect.

That maybe welcome news for policymakers who hope to avoid a property bubble but it has also raised concerns among investors that China’s rapid rebound from the global recession could slow.

The Shanghai Composite index retreated 1.6 per cent to 2,450.29 as investors sold property developers and banks, which have lent heavily to the property sector. That led to choppy trading in Hong Kong where the Hang Seng index was down 0.2 per cent to 20,429.

Japan’s Nikkei 225 stock average fell 0.1 per cent to 9,537.23 and South Korea’s Kospi was hardly changed at 1,735.08.

Elsewhere, Australia’s S&P/ASX 200 dropped 0.7 per cent. Benchmarks in Singapore, Taiwan, Indonesia and India also fell while markets in Malaysia, Vietnam and Sri Lanka rose.

The euro rose 1.2 per cent to a fresh two-month high of US$1.2736 while benchmark crude for August delivery was up US$2.12 at US$77.0 a barrel