European Stocks Gain Amid Continued Fed Stimulus OptimismJonathan Morgan
European stocks advanced to their highest level in more than five weeks after Federal Reserve Chairman Ben S. Bernanke said the U.S. economy will continue to need stimulus measures.
Ashmore Group Plc jumped 7.1 percent after reporting fiscal fourth-quarter net inflows of $4.5 billion. BHP Billiton Ltd. and Rio Tinto Group, the world’s biggest mining companies, each gained 4.6 percent. Portuguese shares slid amid uncertainty over whether the country’s president will approve the new make-up of the government.
The Stoxx 600 increased 0.6 percent to 296.54 at the close of trading. The equities benchmark has risen for four consecutive days, the longest winning streak in seven weeks, as Alcoa Inc. started the U.S. earnings season with results that beat analysts’ estimates. The gauge has still fallen 4.5 percent since May 22 when the Fed first signaled it may pare stimulus if the U.S. economy strengthens in line with its forecasts.
“Bernanke’s words have had a positive impact,” Raimund Saxinger, a fund manager at Frankfurt-Trust Investment GmbH, which oversees about $22 billion, said in a telephone interview. “The central banks are obviously trying to see how markets react to statements. Central banks want markets to figure out that ultimately there will be an end to quantitative easing.”
Bernanke said low inflation and high unemployment mean the Fed needs to continue with its stimulus measures.
“Highly accommodative monetary policy for the foreseeable future is what’s needed in the U.S. economy,” Bernanke said yesterday after the minutes were released, in response to a question following a speech in Cambridge, Massachusetts.
The FOMC released minutes of its June 18-19 meeting, showing many Fed officials wanted to see more signs employment is improving before backing a trim to bond purchases. About half of the 19 participants wanted to halt $85 billion in monthly bond purchases by the end of the year.
In Portugal, the benchmark PSI 20 Index dropped 2 percent. President Anibal Cavaco Silva urged the ruling coalition parties and the main opposition party to reach an agreement to let the country complete its aid program, saying an early election would be undesirable.
While the president’s stance allows the government to stay in office for now, he didn’t say if he accepted Prime Minister Pedro Passos Coelho’s proposal to promote Paulo Portas to vice premier with responsibility for coordinating economic policy with the European Commission, the European Central Bank and the International Monetary Fund.
National benchmark indexes rose in 15 of the 18 western-European markets today. The U.K.’s FTSE 100 added 0.6 percent, Germany’s DAX jumped 1.1 percent and France’s CAC 40 climbed 0.7 percent.
Ashmore gained 7.1 percent to 376.7 pence after it reported net inflows of $4.5 billion in its fiscal fourth quarter. The U.K. fund manager focused on emerging markets said conditions were more challenging toward the end of the quarter.
BHP Billiton gained 4.6 percent to 1,800 pence, its highest price since Sept. 14. Rio Tinto added 4.6 percent to 2,833.5 pence. Anglo American Plc rose 5.4 percent to 1,337 pence. A gauge of commodity producers posted its biggest rally in six months and climbed the most among the 19 industry groups on the Stoxx 600.
Fresnillo Plc, a silver and gold mining and exploration company, surged 13 percent to 1,018 pence, its biggest rally in almost four years, as the precious metals climbed for a fourth day. “The one standout today has been the basic resources sector,” said Saxinger. “It has been oversold in recent months and apparently people feel too underweight in cyclicals.”
Hays Plc advanced 5.2 percent to 99.9 pence after saying its fiscal fourth-quarter total net fees increased 3 percent. The U.K. recruiter forecast full-year operating profit at the top of the 112.3 million pound ($168 million) to 125.5 million pound range of market estimates.
Unibail-Rodamco SE, Europe’s largest publicly-traded property owner, rose 2 percent to 188.1 euros. “Real estate is reacting to Bernanke’s statements, which have eased fears of interest rate increases,” said Saxinger.
Banco Comercial Portugues SA slid 7.5 percent to 8.6 euro cents in Lisbon. Banco Espirito Santo SA declined 4.9 percent to 59.6 cents.
Partners Group Holding AG lost 6.4 percent to 254 Swiss francs. The Swiss money manager focused on private equity posted a 5.9 percent increase in assets in the first half of the year after clients added funds at the lower end of its target range.
Renault SA slipped 2.1 percent to 56.05 euros after Sanford C. Bernstein downgraded the shares to underperform, similar to a sell recommendation, from market perform. France’s second-biggest carmaker faces currency challenges and slowing demand in Brazil, India, Russia and Turkey. Bernstein also said the carmaker’s performance was weaker in Europe than expected.
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