European Shares Rise as Euro Falls, Investors Weigh Fed Talk

Updated on
  • Fed’s Harker, Williams see two to three rate rises this year
  • Euro falls as prospect of higher U.S. rates boosts dollar

European Shares Jump the Most in Six Weeks as Euro Falls

European stocks jumped the most in six weeks as the euro slid and investors assessed the implications of a possible Federal Reserve interest rate increase as early as June.

The Stoxx 600 added 2.2 percent to 344.12 at the close of trading. All industry groups climbed, with insurers and banks leading. The euro has dropped close to a two-month low against the dollar amid an increasing probability of higher borrowing costs in the U.S. this year, favoring European companies that export overseas. The region’s firms generate about half their sales abroad, more than the U.S. and Japan, according to Morgan Stanley.

Federal Reserve Bank of Philadelphia President Patrick Harker said late yesterday that he could see two to three rate increases in 2016 and that if the U.S. economy shows sufficient strength, a June raise would be appropriate. San Francisco Fed President John Williams earlier said two to three hikes this year are “about right.”

“A rise in the dollar would be a big help for European stocks,” said Heinz-Gerd Sonnenschein, a strategist at Deutsche Postbank AG in Bonn, Germany. “People are testing whether the market has found a bottom, and there’s plenty of money sitting on the sidelines. Maybe investors are finally ready to get back in. I wouldn’t say we’re in a bullish market, but we’ve had pretty calm, sideways trading this month even with another Fed rate hike looking more likely.”

Fed Chair Janet Yellen is due to deliver remarks on Friday. Fed funds futures are now indicating for the first time since March a better-than-even chance that the U.S. central bank will raise interest rates by its July meeting.

A European stock rally from a February low had stumbled since reaching a three-month high in April amid concerns about global-growth prospects, mixed earnings reports and the efficacy of central-bank policies. The Stoxx 600 is down 1.9 percent from its recent peak. 

Among stocks moving on corporate news today, Kingfisher Plc rose 3.5 percent after it reported better-than-expected quarterly sales at its businesses in the U.K. and France. SEB SA rallied 11 percent after agreeing to buy German silverware and coffee-machine maker WMF for about 1.6 billion euros ($1.8 billion).

Bayer AG climbed 3.2 percent as Monsanto Co. was said to be poised to reject the German company’s $62 billion takeover offer. The stock was also boosted as Chief Executive Officer Werner Baumann and his top lieutenants took advantage of the recent rout to buy 1.7 million euros of shares.

Galenica AG dropped 6.7 percent after the owner of Switzerland’s biggest pharmacy network said it will split into separate companies by the end of 2017. In March, the company had said the division would probably occur this year. Evonik Industries AG slid 3.7 percent after a shareholder began selling a 4.8 percent stake in the chemical company.