Photographer: Martin Leissl/Bloomberg

European Stock Rally Continues as Draghi Reiterates Ready to Act

  • Draghi says ECB to reassess adequacy of stimulus in December
  • Volkswagen tumbles after revealing more emissions problems

Mario Draghi’s reiteration that the European Central Bank is ready to act to support the euro-area economy helped the region’s stocks extend a rally that has recouped about half the losses from a summer rout, although speculation of a Federal Reserve rate increase this year pruned gains in late trading.

Glencore Plc led miners to the best performance of the 19 industry groups on the Stoxx Europe 600 Index, adding 5.4 percent after selling a share of its future silver output, while also maintaining its full-year profit forecast. ING Groep NV gained 2 percent after the Dutch lender reported a 14 percent rise in third-quarter profit. Marks & Spencer Group Plc rose 2.8 percent after first-half earnings beat analyst estimates and it raised its profitability forecast.

The Stoxx 600 climbed 0.5 percent to 380.28 at the close of trading. Shares pared gains of as much as 1.1 percent after a report showed U.S. services expanded at a faster-than-forecast pace in October, and Fed Chair Janet Yellen said an interest rate move in December is possible if economic data hold up. The level of monetary policy accommodation provided by the ECB will be re-examined in December, Draghi said late Tuesday, reinforcing a signal first given on Oct. 22. The Stoxx 600 has climbed 12 percent since a Sept. 29 low.

“Draghi’s comments are clearly supportive in the short term and earnings season so far has been reasonable although expectations weren’t high,” said David Hussey, head of European equities at Manulife Asset Management in London. “European equities still look reasonable value assuming recovery continues and margins can expand back to previous levels.”

Among miners, still the worst-performing industry group on the Stoxx 600 this year, BHP Billiton Ltd. and Rio Tinto Group each added 1 percent. “What’s been driving the market and what will continue for a while longer is a bit of re-positioning,” said George Godber, a fund manager at Miton Group in London, which manages about $5 billion. “That’s why stocks that were doing poorly are now rising the most.”

Elsewhere, Volkswagen AG slid 9.5 percent after it said it found faulty emissions readings for the first time in gasoline-powered vehicles, with an internal probe showing 800,000 cars had “unexplained inconsistencies” concerning their carbon-dioxide output.

Porsche Automobil Holding SE slumped 8 percent after a financing arm of the company was said to have pulled a $505 million asset-backed bond deal on Tuesday after U.S. regulators said they were expanding their probe into emissions-cheating software.

Lonmin Plc slid 8.8 percent after the world’s third-largest platinum miner said it may have to cease trading if shareholders block a $770 million refinancing plan that includes a stock sale. The shares have fallen 87 percent this year amid sliding prices for the metal.

Barry Callebaut AG dropped 10 percent, the most since 2009, after the world’s biggest maker of bulk chocolate cut its mid-term forecast for volume growth and said this financial year will be challenging due to a difficult cocoa market.

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