European Stocks Rally After Bank of Japan Boosts Stimulus

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European stocks rose to a four-week high amid optimism the Bank of Japan’s stimulus will fill some of the gap left by the end of Federal Reserve bond buying.

The Stoxx Europe 600 Index gained 1.8 percent to 336.8 at the close of trading, boosting its weekly advance to 2.9 percent, the most this year. Barclays Plc and BNP Paribas SA led lenders higher, as all 19 industry groups on the gauge climbed.

The equity benchmark dropped 1.8 percent in October, the most since June 2013, amid concern the European Central Bank’s asset purchases won’t be enough to revive the region’s economy. With the Federal Reserve ending purchases this month, investors are turning to Europe and Japan for sustained support.

The Bank of Japan unexpectedly boosted its stimulus, raising its annual target for monetary expansion to 80 trillion yen ($717 billion), up from 60 to 70 trillion yen. An increase was predicted by just three of the 32 analysts surveyed by Bloomberg News. Separately, the country’s public pensions fund increased its target for holdings of foreign shares to 25 percent from 12 percent of its portfolio.

“Markets don’t really seem to care about what kind of stimulus we get or where it’s coming from, as long we get something,” said Teis Knuthsen, chief investment officer at Saxo Bank A/S’s private-banking unit. “Central banks are trying to squeeze money into the system and as long as economic growth is good enough, all that money will be going into financial assets. What happened in Japan is very powerful for equities, and it’s really rippling throughout global markets.”

Euro-Area Inflation

Investors weighed a report that showed euro-area inflation increased this month for clues about the ECB’s policy stance at its meeting next week. The central bank aims to take inflation closer to 2 percent, while the rate has stayed below 1 percent for a year.

Benchmark indexes in 16 of the 18 western European markets rose today. The U.K.’s FTSE 100 gained 1.3 percent, while France’s CAC 40 advanced 2.2 percent. Germany’s DAX rallied 2.3 percent.

Barclays rallied 8.2 percent to 240.8 pence, for its biggest increase since February 2013, after saying it is confident of reaching the leverage ratio set by the Bank of England. The central bank today set a minimum level of 4.05 percent from 2019, lower than analysts estimated.

BNP Paribas rose 3.5 percent to 50.14 euros after posting an 11 percent gain in third-quarter profit that exceeded analysts’ estimates. Net income was 1.5 billion euros ($1.89 billion), up from 1.36 billion euros a year earlier, the lender said. Loan-loss provisions fell 9.2 percent.

Royal Bank of Scotland Group Plc added 6.2 percent to 388 pence after swinging to a third-quarter profit. The British lender said net income was 896 million pounds ($1.4 billion), beating the average analyst estimate of 582 million pounds. RBS posted a loss of 828 million pounds in the year-earlier period.

International Consolidated Airlines Group SA gained 4.7 percent to 409.2 pence. The owner of the British Airways and Iberia said full-year earnings will be 550 million euros to 600 million euros more than last year’s 770 million euros. IAG had earlier predicted a gain of at least 500 million euros.

Danone added 2.9 percent to 54.22 euros after agreeing to buy a 25 percent stake in Yashili International Holdings Ltd., a Chinese infant milk-formula maker.