European Stocks Rebound as Yellen Clarifies Fed Rate Policy

  • Stoxx 600 rallies most in a month, trimming weekly drop
  • All industry groups rise, Italian shares gain most in Europe

European stocks jumped from an eight-month low after Federal Reserve Chair Janet Yellen said she’s ready to raise rates this year, indicating recent market turmoil won’t derail the U.S. recovery.

Her comments helped clarify the Fed’s thinking, after the central bank’s decision to hold rates last week confused investors about the trajectory of U.S. rates and increased stock volatility. Following a selloff yesterday that wiped out its 2015 gains, the Stoxx Europe 600 Index closed 2.8 percent higher today. 

All 19 industry groups rose at least 1 percent, and Germany’s DAX Index rebounded 2.8 percent from its lowest level since December. Italy’s FTSE MIB Index rallied the most among western-European markets, up 3.7 percent.

“It’s more of a relief rally supported by some clarity from Yellen,” said Carsten Hilck, a fund manager who oversees about $6.6 billion at Union Investment in Frankfurt. “Markets will continue to be choppy, but they were clearly oversold in the past two days. Valuations started to get attractive. The DAX has been especially punished so we started buying German stocks yesterday.”

Europe’s benchmark gauge dropped 18 percent from a peak in April through yesterday, taking its valuation to 14.6 times estimated earnings, down from a multiple of 17.1 in July. Today’s biggest advance in a month helped the Stoxx 600 trim a second weekly decline. It’s down 1.6 percent for the period as carmakers tumbled after Volkswagen AG said it cheated on U.S. diesel-emission tests.

Volkswagen fell 3.8 percent, reversing an intraday advance of as much as 4.3 percent, after people familiar with the matter said executives in Germany controlled key aspects of the faked tests.

Carmakers, Deals 

Other automakers clawed back losses today, with BMW AG, Daimler AG and Renault SA rising 2.2 percent or more.

Some stocks moved on deal news today. Quintain Estates & Development Plc jumped 7.6 percent after Lone Star Funds raised its offer for the housing developer and property investor. Sanofi added 3.1 percent as people familiar with the matter said the drugmaker may sell its bio-surgery and renal units.

Synergy Health Plc soared 42 percent after a U.S. judge denied a move by U.S. officials to block the company’s takeover by Steris Corp., paving the way for a $1.9 billion merger.

Adidas AG gained 4.1 percent after peer Nike Inc. reported quarterly earnings that beat estimates.

Zodiac Aerospace slid 6.8 percent after American Airlines Inc. dropped the company as a supplier of seats on some of its planes, citing delivery delays.

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