European Stocks Advance as Fed Announces Asset Purchases

Sept. 14 (Bloomberg) --European (SXXP) stocks advanced to their highest level in 15 months after the Federal Reserve said it will buy mortgage-backed securities to encourage economic growth in the world’s largest economy.

BHP Billiton Ltd. and Rio Tinto Group both jumped at least 6 percent as Australia’s Treasurer said the country’s resource boom will continue. Lonmin Plc (LMI) rose 5 percent as it resumed talks with striking miners at its platinum mine in South Africa.

The Stoxx Europe 600 Index advanced 1.3 percent to 275.95 at the close, its highest level since June 1, 2011. The equity benchmark has rallied 18 percent from this year’s low on June 4 and has gained 1.3 percent this week.

“This kind of liquidity helps equity markets a lot,” said Theodore Krintas, who helps manage 80 million euros ($105 million) as the managing director of Attica Wealth Management in Athens. “If we get some positive news from the European meeting in Cyprus, I would expect this direction to gain momentum within the next days.”

The Fed said it will increase its holdings of long-term securities with open-ended purchases of $40 billion of mortgage debt a month. The central bank will continue to buy mortgage- backed securities until the outlook for the labor market substantially improves, the Federal Open Market Committee said yesterday in a statement at the end of its two-day meeting in Washington.

Earnings Projections

The FOMC also said it will probably hold the federal funds rate near zero until at least the middle of 2015. The Fed had said the rate would stay low through late 2014. Fed officials said economic growth will improve faster than they had projected, as they upgraded their estimates for gross domestic product growth in 2013 and 2014.

Euro-area finance ministers and central-bank officials hold a two-day meeting starting today in Cyprus to discuss plans for a banking union in the 17-nation currency zone.

European stocks extended their gains after the Thomson Reuters/University of Michigan gauge of consumer confidence unexpectedly climbed. The preliminary index of consumer sentiment rose to 79.2 in September from 74.3 in August. The median forecast of 71 economists surveyed by Bloomberg News had called for a reading of 74.

National benchmark indexes rose in all 18 western-European markets. The U.K.’s FTSE 100 Index climbed 1.6 percent, while Germany’s DAX Index added 1.4 percent. France’s CAC 40 Index advanced 2.3 percent.

BHP Billiton Ltd (BHP), the world’s biggest mining company, and Rio Tinto Group, the third-largest, gained 6 percent to 2,049 pence and 6.6 percent to 3,281.5 pence, respectively.

Australian Mining

Investments in mining and energy projects “still have some way to run,” Australian Treasurer Wayne Swan told the Australia in China’s Century conference in Sydney today, according to a text of his speech. “We are also beginning to see its lasting benefits -- greater economic capacity that will continue to boost our export volumes in coming years.’

Petropavlovsk Plc, a miner of gold in Russia, jumped 15 percent to 433.9 pence. Antofagasta Plc, which owns copper mines in Chile, rose 7.8 percent to 1,334 pence, its biggest rally in nine months, as metal prices jumped in London.

Nyrstar (NYR) NV, the largest producer of refined zinc, soared 11 percent to 5.30 euros. Evraz Plc (EVR), the mining company and steelmaker partly owned by billionaire Roman Abramovich, soared 13 percent to 293.7 pence. Vedanta Resources Plc (VED) surged 13 percent to 1,090 pence.

Chemring, Lonmin

Chemring Group Plc advanced 5.7 percent to 346 pence. The company said that the U.K.’s Takeover Panel has extended a deadline for Carlyle Group LP to make a bid until Oct. 12. The maker of munitions received a preliminary approach from Carlyle on Aug. 17.

Lonmin Plc rose 5 percent to 614.5 pence. The third-largest platinum producer by volume resumed talks in South Africa today to end an illegal strike that has spread to nearby mines that tap the world’s richest reserves of the metal.

The preferred shares of Volkswagen AG (VOW) added 4.9 percent to 152.50 euros. Europe’s largest carmaker said sales in August rose 19 percent to 719,500 vehicles.

Opap SA (OPAP) sank 17 percent to 5.19 euros, the biggest decline on the Stoxx 600 today. The shares dropped the most since the Greek state first sold shares in the company in 2001. Kathimerini reported that the European Commission may ask the government to immediately increase the company’s tax rate to adhere to regulations from the European Union. Greece had proposed to gradually raise the tax to 30 percent by 2020.

The volume of shares changing hands on the Stoxx 600 was 71 percent greater than the average of the last 30 days, according to data compiled by Bloomberg.

To contact the reporter on this story: Tom Stoukas in Athens at astoukas@bloomberg.net

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net

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