European stocks rallied for a second week, closing at their highest level in almost five years, as the European Central Bank (ECB) cut its interest rate and a US jobs report bolstered confidence in the world’s largest economy.
UBS AG and Deutsche Bank AG both surged by more than 8 percent after reporting profit that exceeded analysts’ estimates. BP PLC, Europe’s second-largest oil company, and Adidas AG, the world’s second-biggest sporting goods maker, climbed after posting quarterly results that beat forecasts.
The STOXX Europe 600 Index rose 1.7 percent this week to 301.04, its highest level since June 2008. The equity benchmark has rallied 7.6 percent so far this year boosted by company earnings that beat analysts’ estimates and confidence that central banks will add stimulus to support economic growth.
“We are trying to balance on one side the [European] Central Bank’s actions and on the other side the numbers that are being released,” Lutetia Capital co-chief executive officer Fabrice Seima said in Paris. “The US economy is in a pretty positive situation. The underlying and structural trend is one of positive sentiment in the US and we believe that is here to stay.”
The ECB cut its benchmark interest rate by 25 basis points to a record low of 0.5 percent as predicted by 45 of the 70 economists in a Bloomberg survey. After the decision, ECB President Mario Draghi said at a press conference in Slovakia that “our monetary policy stance will remain accommodative for as long as needed.”
In the US, the US Federal Reserve said it will continue to buy US$85 billion of bonds a month and will increase or reduce purchases if economic conditions change. The US Federal Open Market Committee made the comments following a two-day meeting.
Stocks surged on the final day of trading after a report showed that the US economy added 165,000 workers last month and a revised 138,000 in March.
National benchmark indices advanced in 16 of the 18 western European markets over the week. The UK’s FTSE 100 added 1.5 percent, France’s CAC 40 increased 2.7 percent and Germany’s DAX jumped 3.9
Italy’s FTSE MIB Index gained 2.2 percent as new Italian Prime Minister Enrico Letta formed a government of politicians from his Democratic Party, former Italian prime minister Silvio Berlusconi’s People of Liberty party and supporters of Letta’s predecessor, Mario Monti.
UBS rose 8.9 percent to a two-year high as Switzerland’s largest bank reported first-quarter net income of SF988 million (US$1.06 billion) because of higher revenue at the investment bank and the wealth-management business.
Deutsche Bank surged 13 percent after Germany’s biggest bank reported a net income of 1.65 billion euros (US$2.2 billion) for the first three months of the year. That exceeded the 1.21 billion euro average estimate of six analysts surveyed by Bloomberg.
BP gained 3.8 percent after the international oil company reported first-quarter earnings — adjusted for one-off items and inventory changes, of US$4.2 billion — because of an improved performance at its fuel trading business. The average analyst estimate had called for earnings of US$3.2 billion.
BG Group PLC shares jumped 8.1 percent, while Adidas climbed 8.1 percent to the highest price since 1995 after reporting first-quarter profit of 308 million euros. The sports firm also said its gross margin widened to a record high.