European Stocks Gain as Fed Signals Low Interest Rates
Rio Tinto Group and BHP Billiton Ltd. (BHP) climbed with copper amid speculation China may release a stronger-than-forecast gross domestic product figure tomorrow. Hays Plc (HAS) surged 8.9 percent after the recruitment company forecast profit will be near the top end of analysts’ estimates. Banco Espirito Santo SA (BES) lost 11 percent after saying it will sell shares.
The Stoxx Europe 600 Index (SXXP) rallied 1.2 percent to 257.36 at the close of trading, the biggest gain since April 2. The gauge has retreated for three straight weeks amid mounting concern about the region’s debt crisis and as a U.S. report showed employers added fewer jobs in March than forecast.
“What we saw last week was just a correction,” said Morten Kongshaug, chief equity strategist at Danske Bank A/S in Copenhagen, who has an overweight rating on European equities. “The debt crisis remains my biggest worry, but first-quarter earnings have a lot of potential to calm investors, especially if they show European lenders are doing alright.”
National benchmark indexes advanced in 15 of the 18 western European markets. The U.K.’s FTSE 100 rallied 1.3 percent, while Germany’s DAX and France’s CAC 40 (CAC) increased 1 percent. Spain’s IBEX 35 slipped 0.8 percent.
Fed Vice Chairman Janet Yellen endorsed the central bank’s view that borrowing costs are likely to stay low through 2014 as the central bank misses its goal for full employment and inflation remains in check.
“I consider a highly accommodative policy stance to be appropriate in present circumstances,” Yellen said yesterday in a speech in New York. She also said that allowing the Fed’s program to extend the maturity of the assets on its balance sheet to expire in June wouldn’t amount to a policy tightening.
Separately, the Fed said in its Beige Book business survey published late yesterday that the U.S. economy maintained its expansion in all 12 regions as manufacturing, hiring and retail sales showed signs of strength last month.
Elsewhere, Bank of Japan Governor Masaaki Shirakawa pledged to continue to add monetary stimulus in the world’s third- largest economy amid growing calls from politicians for the central bank to do more to end deflation.
A gauge of European mining companies jumped 3 percent for the biggest gain among 19 industry groups in the Stoxx 600 as copper surged in London.
Rio, BHP Billiton
Rio Tinto, the world’s third-largest mining company, climbed 4.5 percent to 3,487 pence. BHP, the biggest, gained 2.8 percent to 1,906.5 pence and Xstrata Plc (XTA) increased 2.5 percent to 1,105.5 pence.
“Rumors of a stronger Chinese GDP number certainly put a rocket under the FTSE 100 today,” said Chris Beauchamp, a market analyst at IG Index in London. “But this of course runs the risk of disappointment tomorrow.”
China, the world’s largest consumer of copper, will publish its first-quarter GDP data tomorrow. The report is forecast to show the economy expanded 8.4 percent from a year earlier, slowing from the fourth quarter’s 8.9 percent increase, according to a survey of economists.
Hays rallied 8.9 percent to 88.5 pence after the U.K. recruitment company forecast full-year operating profit will “be towards the top of the current range of market estimates.”
Gerresheimer AG (GXI) climbed 10 percent to 35.35 euros, the largest gain in three years, as the German maker of glass and plastic products for the health-care industry raised its forecast for the year.
Infineon Technologies AG (IFX) jumped 5.8 percent to 7.54 euros. The stock was raised to buy from hold at Deutsche Bank AG, which said recent losses created an opportunity.
Banco Espirito Santo plunged 11 percent to 1.04 euros after Portugal’s biggest publicly traded bank by market value announced plans to sell as much as 1.01 billion euros in stock to increase its capital ratios and buy out its partner in an insurance unit.
Royal Dutch Shell Plc (RDSA) retreated 1.1 percent to 25.74 euros in Amsterdam as it investigated the source of a “light sheen” of oil in the Gulf of Mexico.
The stock rebounded from a drop of as much as 5.4 percent, the biggest intraday tumble in more than three years, after Europe’s largest oil producer said it has a “high degree of confidence” that its operations aren’t the source of the sheen, the size of which was estimated at fewer than six barrels of crude.
Nokia Oyj (NOK1V) dropped 7.2 percent to 3.04 euros, extending yesterday’s 14 percent selloff, as brokers reduced their recommendations on the shares. Societe Generale SA downgraded the biggest maker of mobile handsets by volume to hold from buy, while Morgan Stanley trimmed its price estimate by 32 percent to 2.60 euros after the company cut its profit forecasts yesterday.
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