Europe Stocks Rise to Five-Year High as Fed Resists Taper
European stocks rose to the highest level in more than five years as the Federal Reserve unexpectedly decided against slowing the pace of its monthly bond purchases.
UniCredit SpA and Standard Chartered Plc climbed more than 2 percent each as a gauge of lenders advanced. Randgold Resources Ltd. and Polymetal International Plc jumped at least 7 percent as the price of gold rallied. Cie. Financiere Richemont SA (CFR) and Swatch Group AG added more than 1 percent as a report showed Swiss watch exports increased last month.
The Stoxx Europe 600 Index gained 0.6 percent to 315.05, the highest level since June 2008, at the close of trading, after earlier surging as much as 1.2 percent. The equity benchmark has risen 6 percent this month, extending its 2013 advance to 13 percent, as central banks around the world pledged to maintain stimulus measures to support the global economy.
“I’m a bit surprised by the Fed’s decision to postpone tapering,” said Pierre Mouton, who helps oversee $6 billion as a portfolio manager at Notz, Stucki & Cie. in Geneva. “It’s possible that the Fed is afraid of seeing the housing recovery jeopardized. Investors were pricing in a taper, hence the upside reaction in markets today. It is not surprising, as investors have become addicted to liquidity.”
The volume of shares changing hands in Stoxx 600-listed companies was 35 percent greater than the 30-day average, data compiled by Bloomberg show. The VStoxx Index, a measure of expected volatility in euro-area stocks, slid 7.1 percent to its lowest level in a month.
The Fed yesterday refrained from reducing its $85 billion of monthly bond purchases, saying it needs to see more indications that the U.S. economy is improving sustainably. Economists surveyed by Bloomberg before the decision had predicted that the central bank would start tapering stimulus measures this month.
“Conditions in the job market today are still far from what all of us would like to see,” Fed Chairman Ben S. Bernanke said at a press conference in Washington after European markets closed. “The committee has concern that rapid tightening of financial conditions in recent months would have the effect of slowing growth.”
Bernanke reiterated that a decision on slowing the pace of asset purchases would depend on economic data, and that the Fed has no set timetable. The central bank repeated its guidance that its target interest rate will remain low for at least as long as unemployment exceeds 6.5 percent, and the outlook for inflation is no higher than 2.5 percent.
European shares pared gains after a U.S. report today showed that manufacturing in the Philadelphia region expanded in September at the fastest pace since March 2011. The Federal Reserve Bank of Philadelphia’s general economic index jumped to 22.3 this month from 9.3 in August, while a gauge of the six-month outlook was the strongest in a decade.
“The market doesn’t want any good data from now on,” Ioan Smith, a strategist at KCG Europe Ltd. in London, said in a phone interview. “The most difficult part for investors is, how can the market calibrate data-dependent policy that keeps changing what it’s dependent on? The Fed keeps moving the goal posts.”
National benchmark indexes gained in all 18 western European markets today, except Iceland. Germany’s DAX rose 0.7 percent, extending a record. The U.K.’s FTSE 100 added 1 percent and France’s CAC 40 climbed 0.9 percent.
UniCredit, Italy’s biggest bank, climbed 2.7 percent to 4.94 euros. Standard Chartered added 3.3 percent to 1,564 pence. A gauge of European lenders increased 0.8 percent, extending its rally since a June 24 low to 20 percent.
Randgold jumped 8.1 percent to 4,841 pence as gold extended yesterday’s biggest gain in more than 15 months. Polymetal surged 7.9 percent to 705.5 pence, the largest advance since Aug. 16. Fresnillo Plc, which produces gold and silver in Mexico, rallied 6.1 percent to 1,069 pence.
A gauge of commodity producers posted the third-best performance of the 19 industry groups on the Stoxx 600.
Richemont, owner of the Cartier brand, climbed 2.1 percent to 94.60 Swiss francs as a report showed watch exports rose 0.5 percent in August from a year earlier. Swatch, the biggest maker of Swiss watches, gained 1.7 percent to 596.50 francs.
Scania AB (SCVB) added 2.8 percent to 143.30 kronor after saying European demand isn’t showing “seasonal weakness” in the current quarter. The Swedish truckmaker controlled by Volkswagen AG also reiterated its worldwide target of delivering 120,000 vehicles a year by 2020.
European Aeronautic, Defence & Space Co. (EAD) rose 1.7 percent to 47.25 euros, the highest price since it sold shares to the public in 2000. Deutsche Lufthansa AG split an order for 59 wide-body aircraft valued at $19 billion between EADS unit Airbus SAS and Boeing Co.
K+S AG, a German potash producer, dropped 3.5 percent to 20.67 euros. Potash Corp. of Saskatchewan Inc. said global markets for the crop nutrient are “paralyzed” following OAO Uralkali’s withdrawal from a joint venture in Belarus.
Volkswagen preferred shares dropped 2.1 percent to 177.25 euros after Manager Magazin reported Europe’s largest automaker may miss profit goals as costs climb and growth slows.
Chief Financial Officer Hans Dieter Poetsch is concerned that the automaker won’t meet 2015 targets, the German monthly magazine reported today, without saying where it got the information.
“The suggestion that Volkswagen isn’t committed to its targets is false,” the Wolfsburg-based carmaker said in an e-mailed statement. “Volkswagen completely stands behind its statements about the future development of the company.”
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