Europe Stocks Rise Near 6-Year High as ECB Adds StimulusSofia Horta e Costa
European stocks rose, trading near a six-year high, and Germany’s DAX Index briefly topped 10,000 for the first time after European Central Bank President Mario Draghi unveiled new plans to stimulate the region’s economy.
Banks posted some of the biggest gains in the region, with Mediobanca SpA, Banco de Sabadell SA and Commerzbank AG climbing more than 3 percent each. Smith & Nephew Plc rose 2.3 percent as Medtronic Inc. was said to consider a takeover of the U.K. company. Asos Plc tumbled the most on record after cutting its profitability forecast, dragging online retailers lower. Deutsche Bank AG fell 3.8 percent after offering shareholders a discount of more than 20 percent to buy new stock.
The Stoxx Europe 600 Index added 0.4 percent to 344.99 at the close of trading in London after rising as much as 1.2 percent. Draghi unveiled an unprecedented round of measures to avoid the threat of deflation, saying officials will speed up preparations related to the purchases of asset-backed securities. The DAX added 0.2 percent to 9,947.83 after climbing to 10,013.69. The Euro Stoxx 50 Index of euro-area equities gained 0.9 percent to 3,267.05, the highest level since September 2008.
“Draghi’s big statement for me is that the ECB is accelerating plans for QE,” Alan Higgins, who helps oversee about $48 billion as U.K. chief investment officer at Coutts & Co. in London, said in an interview. “He’s been quite explicit. What’s driving risk assets today is that if inflation continues to fall and the euro continues to rally, the ECB will do conventional QE.”
The ECB opened a 400-billion-euro ($542 billion) liquidity channel tied to bank lending, and officials will begin work on an asset-purchase plan. The ECB cut its deposit rate to minus 0.1 percent, becoming the first major central bank to take one of its main rates negative. It lowered its benchmark interest rate to a record low of 0.15 percent, compared with a median estimate of 0.1 percent in a Bloomberg News survey. All but two of the 60 economists surveyed had forecast a cut in the main refinancing rate.
National benchmark indexes rose in 12 of the 17 western European markets open today. France’s CAC 40 climbed 1.1 percent, and the U.K.’s FTSE 100 slid 0.1 percent. Markets in Denmark were closed for the Constitution Day holiday.
The volume of shares changing hands on Stoxx 600-listed companies was 29 percent greater than the average of the past 30 days, data compiled by Bloomberg show.
A gauge of lenders in the Euro Stoxx 50 rallied 1.3 percent. Italy’s Mediobanca rose 4 percent to 7.65 euros, while Spain’s Banco de Sabadell advanced 3.6 percent to 2.52 euros and Commerzbank, Germany’s second-largest bank, gained 3.2 percent to 11.81 euros.
Smith & Nephew advanced 2.3 percent to 1,088 pence. The maker of medical devices is aware of Medtronic’s interest, as are investment banks, said people familiar with the matter. Medtronic’s preparations for a bid are at an early stage and no offer is imminent, they said.
Bellway Plc added 2.2 percent to 1,436 pence. The British homebuilder said demand for new homes remains robust and predicted an operating margin of about 17 percent for the year ending July 31 from less than 14 percent.
Asos tumbled 31 percent to 3,120 pence, its lowest price since April 2013. The online fashion retailer forecast that earnings before interest and taxes will be about 4.5 percent of sales for the year through August, compared with a previous margin estimate of 6.5 percent. Retail sales increased 25 percent in the quarter through May after rising 26 percent in the two months through February, the company said.
Investment AB Kinnevik fell 6 percent to 253.40 kronor. The Swedish company owns a stake in Zalando AG, a German online shoe and clothing retailer.
Milan-based Yoox SpA, which competes with Asos, retreated 6.1 percent to 21.75 euros. Boohoo.com Plc lost 9.1 percent to 45 pence, extending losses since its March initial public offering to 10 percent.
Deutsche Bank fell 3.8 percent to 28.58 euros. Europe’s biggest investment bank said it will offer 6.75 billion euros worth of new shares to investors at 22.50 euros apiece, exceeding an original target of 6.3 billion euros.
Volvo AB slipped 2.9 percent to 93.70 kronor. UBS AG cut its rating on the world’s second-largest truckmaker to sell from neutral. Analysts led by Fredric Stahl said its recovery in Europe will disappoint because the improvement in truck demand doesn’t come from all markets but mainly from Italy.