Europe Stocks Rise After Yellen’s Comments, Posting Weekly Gains

European Stocks React to Yellen's Speech
  • Almost all industry groups in Stoxx 600 gain, reversing drops
  • France’s CAC 40 Index posts one of the biggest gains in region

European stocks climbed for a fourth day this week after comments by Federal Reserve Chair Janet Yellen spurred optimism about the economic recovery, while she reiterated that the central bank will take a gradual approach to raising borrowing costs.

The Stoxx Europe 600 Index rose 0.5 percent, erasing a decline of as much as 0.3 percent and taking its weekly advance to 1.1 percent. Yellen said the case to raise interest rates is getting stronger as the U.S. economy approaches the central bank’s goals, though she didn’t discuss the specific timing of a move. Traders now see a 34 percent chance that the central bank will raise borrowing costs next month.

“The economy has strengthened in a way that is following the path of the Fed,” said Guillermo Hernandez Sampere, head of trading at MPPM EK in Eppstein, Germany. His firm oversees $260 million. “A possible September hike is off the table, but for sure they will start the hiking process quite soon, so chances are the bets will be on December if we totally don’t get disappointing data in Q3. I think we will see higher markets at the end of the year.”

While European equities advanced, they’ve alternated between weekly gains and losses all month, with the Stoxx 600 trading in a tight range and struggling to find a direction after a rebound of as much as 12 percent following the aftermath of Britain’s secession vote. On Friday, the volume of shares changing hands was about a third lower than the 30-day average ahead of a U.K. holiday on Monday.

The Stoxx 600 rebounded after falling the most in three weeks on Thursday, when a report showed German business confidence unexpectedly weakened to the lowest level in six months. That renewed concerns about the efficiency of European Central Bank stimulus to spur growth amid political turmoil. Mangers have withdrawn money from the region’s stock funds for a record 29th straight week, according to a Bank of America Corp. report dated Aug. 25.

Still, almost all the industry groups in the Stoxx 600 advanced following Yellen’s comments, with miners and energy producers leading gains as commodities climbed amid a slide in the dollar. France’s CAC 40 Index rose 0.8 percent for one of the biggest increases among western-European markets. Benchmark gauges of Spain and Italy advanced more than 0.7 percent.

Among stocks moving on corporate news, Gemalto NV jumped 6.5 percent after the software firm posted an increase in net profit and confirmed its gross margin forecast for the year. French media company Vivendi SA fell 1.7 percent after reporting quarterly earnings that missed analyst estimates. Hennes & Mauritz AB slid 2.3 percent after HSBC Holdings Plc lowered its rating on the retail to a hold, citing a lack of catalysts.

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