European Stocks Advance as China Cuts Interest Rates
European stocks rallied, completing their biggest two-day gain since November, after China cut interest rates, adding to speculation that policy makers around the world will take steps to revive growth.
Rio Tinto Group and Anglo American Plc (AAL) led a surge by metal producers, rising at least 2 percent. Spanish banks also advanced after the country beat its 2.07 billion-euro target ($2.6 billion) at a bond sale. Vivendi SA jumped 3.7 percent after the company was said to have decided to discuss whether to sell its video-game unit at a meeting later this month.
The Stoxx 600 gained 1.1 percent to 242.64 at the close of trading, extending yesterday’s 2.3 percent advance after the European Central Bank said it will act if necessary as the outlook for growth deteriorates. The gauge has still fallen 11 percent from its 2012 high.
“We’ve seen the first policy response today,” said Kevin Lilley, a European fund manager at Old Mutual Asset Managers U.K. in London, which has 4 billion pounds ($6.2 billion) in assets under management. “Economic data has just recently deteriorated which you could argue is more likely to prompt a policy response. I think we are now at that stage.”
China cut interest rates for the first time since 2008, increasing its efforts to combat a deepening economic slowdown. The one-year deposit rate will drop to 3.25 percent from 3.5 percent with effect from tomorrow and the one-year lending rate will fall to 6.31 percent from 6.56 percent, the People’s Bank of China said on its website today.
Banks can also offer a 20 percent discount to the benchmark lending rate, the PBOC said, widening from a previous 10 percent.
U.K. Bond Buying
In the U.S., Federal Reserve Vice Chairman Janet Yellen said late yesterday that stalled improvement in the labor market and weakening financial conditions may lead the central bank to boost its record monetary easing.
The Bank of England today left its asset-purchase program on hold as the threat from above-target inflation overrode policy makers’ concern that the euro area’s debt crisis has weakened U.K. economic growth.
National benchmark indexes climbed in every western- European market that opened today except Portugal. Germany’s DAX rose 0.8 percent and the U.K.’s FTSE 100 gained 1.2 percent. France’s CAC 40 climbed 0.4 percent. Austria’s market was closed for a public holiday.
Mining Companies Gain
A gauge of mining companies surged 2.5 percent for the biggest advance on the Stoxx 600 (SXXP) after China’s central bank cuts its benchmark interest rates. Rio Tinto, the world’s third- largest mining company, increased 4 percent to 3,015 pence, while Anglo American climbed 2 percent to 2,133 pence. Xstrata Plc gained 3 percent to 966.8 pence.
Santander SA added 1.7 percent to 4.78 euros in Madrid after Spain’s bond auction helped ease concern about financing the region’s third-biggest budget deficit. Banco Bilbao Vizcaya Argentaria SA (BBVA) increased 1.2 percent to 5.10 euros and Banco de Sabadell SA (SAB) rose 1.6 percent to 1.37 euros.
Spain sold its benchmark 10-year bond at a yield of 6.044 percent, the most since Nov. 17 when the yield in the secondary market reached a euro-era record 6.78 percent. Demand for the security was 3.29 times the amount sold, higher than at the previous auction in April.
France also sold as much as 7.84 billion euros in debt, at the top end of its target, taking advantage of investors’ flight to safety. The country issued 3.48 billion euros in benchmark 10-year bonds at an average yield of 2.46 percent, lower than the 2.96 percent in the last auction on May 3.
Vivendi Shares Jump
Vivendi (VIV) rallied 3.7 percent to 13.59 euros. The French conglomerate will debate the future of Activision Blizzard Inc. at a retreat for senior executives starting on June 22, according to people with knowledge of the matter.
Chief Executive Officer Jean-Bernard Levy and Chairman Jean-Rene Fourtou will lead talks on whether to sell part or all of the company’s 61 percent stake in Activision, said the people, who asked not to be identified because the meeting is private. Vivendi has met investors in the last few weeks to discuss options including the possible spinoff of pay-TV unit Canal Plus, which is 20 percent owned by Lagardere SCA, said one person.
Johnson Matthey Plc (JMAT) gained 4.9 percent to 2,304 pence after the maker of a third of all autocatalysts reported a 74 percent jump in full-year profit to 315.9 million pounds and said it will pay a special dividend. Sales, excluding precious metals, climbed 17 percent to 2.7 billion pounds.
Tullow Oil, Mediobanca
Tullow Oil Plc (TLW) advanced 2.1 percent to 1,468 pence after the oil and gas explorer said it found oil at its Paon-1X exploration well in the sea near Ivory Coast.
Mediobanca SpA (MB) rose 3.1 percent to 3.31 euros after La Repubblica reported that billionaire Vincent Bollore may increase his stake in the Italian investment bank if shareholder Groupama SA exits.
Swedish companies also advanced today after the market was closed for a public holiday yesterday. SEB AB climbed 4.8 percent to 41.96 kronor, Swedbank AB (SWEDA) jumped 4.5 percent to 107.60 kronor and SSAB AB (SSABA) rose 4.4 percent to 56.70 kronor.
The volume of shares changing hands on the Stoxx 600 was 16 percent greater than the average of the last 30 days, according to data compiled by Bloomberg.
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