European Shares Rally Most in 10 Weeks Before Fed Rate Decision

Stoxx Europe 600 Heads for Worst Dec. Since 2002
  • Glencore upgrade helps miners; automakers rise on sales data
  • Stoxx 600 is still on track for worst December since 2002

European stocks rallied the most since Oct. 5 as investors bet that the U.S. economy is strong enough to cope with the Federal Reserve’s expected first interest rate increase in almost a decade.

Tullow Oil Plc helped push energy companies to the best performance of the 19 industry groups on the Stoxx Europe 600 Index after the successful exploration of a well increased the potential size of oil resources in Kenya. Total SA and Royal Dutch Shell Plc added at least 3.2 percent as oil prices jumped. Automakers climbed after data from the European Automobile Manufacturers’ Association showed car sales in the region increased 14 percent in November. Glencore Plc rose 3 percent after JPMorgan Chase & Co. recommended buying the shares, citing its “credible” strategy update.

The Stoxx Europe 600 Index advanced 2.9 percent to 359.58 at the close of trading, snapping a five-day losing streak. Germany’s DAX Index and France’s CAC 40 were among the biggest gainers, rising at least 3.1 percent. The Stoxx 600 is still down 6.7 percent this month, on course for its worst December since 2002 amid a rout in commodities, concern about U.S. monetary policy tightening and disappointment over the extent of European stimulus.

“Everybody knows the Fed will do something on interest rates and they are doing it because the economy is doing well and that’s a good sign for equity investors,” said Herbert Perus, head of equities at Raiffeisen Capital Management in Vienna. “In the past, when interest rates are going up, the market is going up as well. It will be volatile but for the next nine months the prices will be higher than today.”

Traders are now pricing in a 78 percent chance that U.S. policy makers will increase borrowing costs tomorrow.

Declines in miners and energy companies dragged European stocks lower yesterday as investors turned away from riskier assets amid lingering fears about global growth. A high-yield fund liquidating its portfolio also contributed to bearish sentiment across markets.

Among stocks moving on corporate news today, Syngenta AG advanced 2.2 percent as China National Chemical Corp. was said to be weighing a new bid after its chairman met with officials from the world’s largest chemical maker last week.

Volkswagen AG added 1.7 percent after it posted a 4.2 percent increase in November sales, even as it suffered its biggest decline in monthly European market share since September’s emissions scandal.

Sanofi rose 5.3 percent after saying it is in exclusive talks to swap assets with Germany’s Boehringer Ingelheim GmbH in a 22.8 billion-euro ($25 billion) transaction. Metro AG gained 4.4 percent after reporting fourth-quarter profit that beat analysts’ estimates and forecasting further improvements.

Abengoa SA jumped in the final minutes of trading to close 11 percent higher after Reuters reported that the company’s creditors may provide an additional 100 million euros in January.

Aveva Group Plc tumbled 28 percent after saying it has ended talks for a merger with Schneider Electric SE.

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