Europe Stocks Rise as Carney Flags Stimulus, Brexit Angst Eases

Brexit Winners and Losers in Equities
  • Stoxx 600 has now recovered more than half its Brexit loss
  • Bank of England’s Carney says will probably loosen policy

European shares advanced for a third day as investor concerns over the long-term impact of Britain’s decision to leave the European Union faded, and Governor Mark Carney said the Bank of England could loosen policy within months.

The Stoxx Europe 600 Index gained 1 percent to 329.88 at the close. The equity gauge fell as much as 0.9 percent in early trading, before recovering to spend most of the session little changed, and then strengthening as Carney spoke. It has now recouped more than half of the losses caused by Friday’s shock vote for British secession. The volume of shares changing hands was 35 percent greater than the 30-day average. The FTSE 100, which yesterday erased its post-Brexit decline, jumped 2.3 percent to its highest level since August 2015.

“Central banks will flood the market throughout the summer with easy money to make sure no real big accident happens,” said Benno Galliker, a trader at Luzerner Kantonalbank AG in Lucerne, Switzerland. “The expectation of easy monetary policy across the world is one of the things that works well for the stock market and most European companies aren’t affected that much by Brexit because they trade with China and the U.S. mainly.”

In his second televised address since the country voted to leave the EU, Carney said the central bank won’t hesitate to act when it comes to protecting the economy or the financial system, while warning that there’s only so much he can do. The BOE will also continue its liquidity auctions for banks on a weekly, rather than monthly, basis and consider a “host of other measures.”

While a gauge of volatility is easing, European shares have had a wild ride in the run-up to and in the aftermath of the Brexit vote, with trading volumes reaching records. After rising as much as 8.1 percent from a three-month low on June 14 through the day of the referendum, the Stoxx 600 tumbled 11 percent over the following two sessions. Even after the subsequent rally, the gauge posted a 5.1 percent decline in June, its worst monthly drop since January. For the quarter, it’s down 2.3 percent.

RWE AG jumped 6.8 percent today, leading a gauge of utility companies to the best performance of the 19 industry groups on the Stoxx 600, after Germany’s largest electricity producer provided details of the new renewable energy, grid and retail business that it’s splitting from its conventional power generation operations. Antofagasta Plc led a gauge of miners higher as copper erased an earlier loss.

Italian banks led by Intesa Sanpaolo SpA helped a gauge of lenders bounce back from a decline after an EU official said that the European Commission approved 150 billion euros ($166 billion) in government liquidity guarantees that Italy can provide to its banks until the end of the year.

Deutsche Bank AG fell 2.7 percent after failing annual stress tests conducted by the Federal Reserve. Banco Santander SA, which also fell short of the Fed’s requirements, slipped 1.4 percent. Royal Bank of Scotland Group Plc dropped 4.8 percent as Morgan Stanley downgraded the U.K. lender to the equivalent of hold.

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