European Stocks Rise Most Since 2011 on Stimulus PressureJonathan Morgan
European stocks climbed the most in almost three years, ending their longest losing streak in 11 years, as an ailing euro-area economy increases pressure on policy makers to provide more stimulus measures.
The Stoxx Europe 600 Index jumped 2.8 percent to 318.68 at the close of trading, after a 7.7 percent slump in the past eight days dragged it to the lowest level of the year. Equities extended early gains after the European Central Bank’s Benoit Coeure said it will start buying assets within days. All 19 industry groups in the Stoxx 600 advanced, with automakers jumping as an industry association said car sales revived last month. Oil and gas companies rebounded from their lowest level in three years, while banks recovered from a one-year low.
“Any news coming from the ECB in terms of its asset-purchase program will be quite positive and supportive to equity markets, especially after the recent selloff,” Guillaume Duchesne, an equity strategist at BGL BNP Paribas SA in Luxembourg, said in a phone interview. “There was at the beginning of October a big negative reaction after Mario Draghi gave unclear messages to the markets and this has weighed on stock markets.”
Europe led a rout that wiped more than $5.5 trillion from the value of equities worldwide since September as concern over the economic recovery re-emerged. The International Monetary Fund cut its global-growth outlook last week, and data from industrial production in Germany to retail sales in the U.S. stoked investor concern. Spain’s failure to reach its maximum target in a bond sale yesterday highlighted the fragility of the recovery.
The Stoxx 600 slumped 2.4 percent on Oct. 2 after ECB President Mario Draghi stopped short of spelling out how many assets the central bank might buy to head off deflation.
“It is a psychological market these days,” Soeren Steinert, who helps manage about $24 billion as associate director for equities trading at Quoniam Asset Management GmbH in Frankfurt, wrote in an e-mail. “The market is overshooting in one or the other direction, without being driven by the obvious logical reasons you find in normal markets.”
For the moment, policy makers are holding to the view that the region needs time rather than new stimulus. German Chancellor Angela Merkel told lawmakers in Berlin yesterday that existing economic aid had been underused and now wasn’t the moment to ease up on the fiscal discipline she credits with bringing stability to the continent.
Coeure said the ECB will start purchasing assets “within the next days” as part of its previously-announced measures to stimulate economic growth in the euro area.
At the International Monetary Fund’s annual meetings in Washington earlier this month, Draghi again signaled that he intends to expand the bank’s balance sheet by as much as 1 trillion euros ($1.3 trillion) to stave off deflation in the euro area.
National benchmark indexes advanced in all 18 western European markets. Germany’s DAX Index climbed 3.1 percent, France’s CAC 40 Index increased 2.9 percent, and the U.K.’s FTSE 100 Index rose 1.9 percent.
Greece’s ASE Index jumped 7.2 percent -- its biggest gain since June 2012 -- after closing yesterday at its lowest level since July 2013. Prime Minister Antonis Samaras said today that Greece is negotiating with its international creditors over a possible precautionary credit line that would be available should market borrowing costs spike after the nation exits its rescue program.
In the U.S., Commerce Department data showed that new home construction rose in September after slumping a month earlier. Housing starts climbed 6.3 percent to a 1.02 million annualized rate from a 957,000 pace in August.
European shares extended gains after a release showed the Thomson Reuters/University of Michigan preliminary sentiment index for October increased to 86.4 from a final reading of 84.6 the prior month. The median projection in a Bloomberg survey of economists called for 84.
Accor SA climbed 4 percent to 31.51 euros. The hotel operator reported a 4.6 percent increase in third-quarter comparable sales, exceeding analysts’ estimates of a 3.5 percent rise. Accor confirmed its earnings before interest and taxes forecast for 2014 of 575 million euros to 595 million euros.
A gauge of auto-related stocks gained the most in more than 15 months after data from the European Automobile Manufacturers’ Association showed registrations increased 6.1 percent in September from a year earlier to 1.27 million vehicles. PSA Peugeot Citroen added 7 percent to 9.28 euros and Volkswagen AG increased 4.5 percent to 160 euros.
National Bank of Greece SA climbed 9.1 percent to 2.04 euros and Alpha Bank AE added 6.3 percent to 57 euro cents, pushing a gauge of lenders to the third-largest gain on the Stoxx 600.
Rolls-Royce Holdings Plc tumbled 12 percent to 832 pence, its lowest price in more than two years. The maker of commercial-aircraft engines said full-year revenue will fall rather than remain unchanged as it had predicted earlier, because of order delays and Russian trade sanctions. Sales will drop between 3.5 percent and 4 percent, Rolls-Royce said in a statement.
The volume of shares changing hands in Stoxx 600-listed companies was 43 percent higher than the 30-day average, according to data compiled by Bloomberg.