European Stocks Rise as ECB Holds Benchmark Rate at Low
European stocks climbed as European Central Bank President Mario Draghi reiterated that interest rates will stay low for an extended period, while the Federal Reserve said it saw a modest to moderate U.S. economic recovery.
PSA Peugeot (UG) Citroen added 5.4 percent as its chief executive officer predicted a market-share increase in an interview with Le Parisien. Telecom Italia SpA rose 8.4 percent after a report that Egyptian billionaire Naguib Sawiris may buy a stake in Italy’s biggest phone company. TeliaSonera AB slid 1.9 percent as Finland cut its holding in the network operator.
The Stoxx Europe 600 Index added 0.7 percent to 304.55 at the close of trading. The benchmark gauge lost 2.4 percent last week on concern the U.S. and its allies would take military action against Syria after chemical-weapon attacks that President Barack Obama’s administration said killed more than 1,400 people.
“Draghi’s comments reinforce the view that the central bankers are in no mood to rush any rate rise and in no mood to spook the markets,” said Justin Urquhart Stewart, who helps oversee about $6.8 billion at Seven Investment Management in London. “He wants to put recent good economic news into context -- from a flat dull position we at last can see the first shafts of light.”
The ECB today kept its benchmark interest rate unchanged at a record low after the 17-nation euro area returned to growth in the second quarter.
The euro-area economy expanded 0.3 percent in the three months through June. Recent economic indicators point to a further recovery in the second half as an index of services and factory output climbed to the highest level since June 2011 and economic confidence soared to a two-year high.
Still, “the risks surrounding the outlook for the euro area continue to be on the downside,” Draghi said at a press conference in Frankfurt. “The Governing Council confirms it expects the key rate to remain at the current level or below for an extended period.”
Bank of England officials left their bond-buying program unchanged today at 375 billion pounds ($586 billion), as forecast by all 38 economists in a Bloomberg News survey. They also kept the key interest rate at a record low 0.5 percent.
In the U.S., increased spending on cars and housing helped the economy maintain a “modest to moderate” pace of expansion from early July through late August, even as borrowing costs increased, the Fed said yesterday in its Beige Book business survey of economic conditions.
The Senate Foreign Relations Committee voted to authorize Obama to conduct a limited U.S. military operation in Syria, the first step toward congressional endorsement of the effort. The full Senate will begin discussing military action from Sept. 9.
The volume of shares changing hands in Stoxx 600 companies was 35 percent higher than the 30-day average, according to data compiled by Bloomberg.
Peugeot, Europe’s second-biggest automaker, rose 5.4 percent to 11.24 euros. CEO Philippe Varin forecast an increase in market share in the third quarter, according to an interview with Le Parisien.
A gauge of auto-related companies posted the largest gain of the 19 industry groups on the Stoxx 600. Bayerische Motoren Werke AG, the biggest maker of luxury cars, added 6 percent to 76.97 euros, its highest price since at least 1992. Volkswagen AG, Europe’s largest automaker, climbed 1.2 percent to 172 euros. Renault SA advanced 5.8 percent to 56.50 euros.
Telecom Italia (TIT) jumped 8.4 percent to 60.7 euro cents. La Repubblica reported that Sawiris may buy a stake in the phone company. The newspaper didn’t cite anyone.
Dixons Retail Plc jumped 5.9 percent to 46.88 pence, its highest price in nearly five years. The U.K.’s largest electronics retailer said it’s close to exiting its online unit Pixmania after getting an irrevocable offer from Germany’s Mutares AG. It has also agreed to sell its Turkish operations in transactions that will rid it of unprofitable businesses and enable it to focus on U.K. growth.
ICAP Plc advanced 6.7 percent to 400 pence. Morgan Stanley raised the world’s largest broker of transactions between banks to overweight, similar to a buy rating, from underweight. The brokerage also increased its target price on the stock to 418 pence, citing greater clarity over U.S. rules governing swap-execution facilities and an increasingly attractive risk-reward profile as regulatory risks diminish.
TeliaSonera (TLSN) slid 1.9 percent to 47.56 Swedish kronor. Solidium Oy, Finland’s equity-asset manager, sold 1.6 percent of shares in the Stockholm-based company in an accelerated book building to institutional investors, it said in a statement.
Aker Solutions ASA slipped 1.6 percent to 91.50 Norwegian kroner. Nomura Holdings Inc. downgraded the oil services group controlled by billionaire Kjell Inge Roekke to reduce, similar to a sell rating, from buy.
“We lower our margins for 2014 and 2015 as the company faces underutilisation at its yards outside Norway owing to competition from Korean companies,” the brokerage’s note said. Nomura set a target price of 85 kroner on the shares.
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