Draghi Momentum Pushes Europe Stocks to Best Jump Since 2011

European Stocks Surge for Second Day
  • Stoxx 600 posts first weekly gain in 2016 on stimulus bets
  • Energy companies lead rally as oil rebounds from 12-year low

European stocks posted their biggest two-day gain since October 2011 on increased investor confidence that central banks will act to support markets.

The Stoxx Europe 600 Index rose 3 percent to 338.36 at the close of trading, taking its two-day climb to 5 percent. It added 2.6 percent this week -- its biggest such gain since November -- after rising the most in a month yesterday following European Central Bank President Mario Draghi’s signal of an increase in stimulus as early as March. The volume of shares changing hands was 41 percent higher than the 30-day average. The VStoxx Index measuring volatility expectations for euro-area shares slid 11 percent.

“There is hope of more stimulus in March and potential for even more stimulus in Japan and China, so if we get concrete positive economic news the rebound could last into next week,” said John Plassard, senior equity-sales trader at Mirabaud Securities LLP in Geneva. “I told my clients to fasten their seatbelts and wait for better news, and this is finally happening.”

Central banks are returning to center stage as concern over Chinese growth rocks international financial markets, and the prolonged slide in oil prices puts inflation targets out of reach. Pressure is increasing on the Bank of Japan to enlarge stimulus at its meeting next week, while China said it will keep intervening in its equity market to “look after” investors and has no intention of further devaluing the yuan. 

Speaking at the World Economic Forum in Davos, Switzerland, today, Draghi said he’s concerned about the outlook for euro-area inflation and reiterated the ECB’s determination to reach its price-stability mandate.

The Stoxx 600 has fallen 7.5 percent this year and entered a bear market last week. Strategists are still betting on a rebound by the end of the year, with an average year-end forecast of 402 for the gauge.

A measure of energy-related companies in Europe rallied the most of the 19 industry groups on the Stoxx 600 as oil rebounded, with service provider Tullow Oil Plc surging 14 percent and Seadrill Ltd. rising 8.6 percent. BHP Billiton Ltd. helped push a gauge of commodity producers higher, although late selloffs in Glencore Plc and Rio Tinto Group pared gains.

What rout? European stocks will rebound 20 percent, strategists say.
What rout? European stocks will rebound 20 percent, strategists say.

Among stocks moving on corporate news, Tod’s SpA gained 3.7 percent after reporting better-than-expected sales for the fourth quarter and full year. Sandvik AB rose 6.6 percent after saying that it has appointed Electrolux AB Chief Financial Officer Tomas Eliasson as its new CFO.

Banca Monte dei Paschi di Siena SpA advanced 2.7 percent -- paring earlier gains of as much as 19 percent -- after saying it is bringing forward the board meeting on its results to reassure markets. Chairman Massimo Tononi separately told Il Sole 24 Ore that the lender has no plans for a capital increase, though he didn’t rule out the possibility of being helped by the Italian government.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE