European stocks climbed the most in almost three years on Friday, ending their longest losing streak in 11 years, as an ailing eurozone economy increases pressure on policymakers to provide more stimulus.
The STOXX Europe 600 Index jumped 2.8 percent to 318.68 at the close of trading, after a 7.7 percent slump in the past eight days dragged it to the lowest level of the year.
Equities extended early gains after European Central Bank (ECB) Executive Board member Benoit Coeure said the financial authority will start buying assets within days.
All 19 industry groups in the STOXX 600 advanced, with automakers jumping as an industry association said car sales revived last month. Oil and gas companies rebounded from their lowest level in three years, while banks recovered from a one-year low.
“Any news coming from the ECB in terms of its asset-purchase program will be quite positive and supportive to equity markets, especially after the recent selloff,” BGL BNP Paribas SA equity strategist Guillaume Duchesne said via telephone. “There was at the beginning of October a big negative reaction after [ECB President] Mario Draghi gave unclear messages to the markets and this has weighed on stock markets.”
Europe led a rout that has wiped more than US$5.5 trillion from the value of equities worldwide since last month, as concern over the economic recovery re-emerged.
The IMF cut its global growth outlook last week and data from industrial production in Germany to retail sales in the US stoked investor concern. Spain’s failure to reach its maximum target in a bond sale on Thursday highlighted the fragility of the recovery.
The STOXX 600 slumped 2.4 percent on Oct. 2 after Draghi stopped short of spelling out how many assets the central bank might buy to head off deflation.
“It is a psychological market these days,” Soeren Steinert, associate director for equities trading at Quoniam Asset Management GmbH in Frankfurt, wrote in an e-mail. “The market is overshooting in one or the other direction, without being driven by the obvious logical reasons you find in normal markets.”
For the moment, policymakers are holding to the view that the region needs time rather than new stimulus. German Chancellor Angela Merkel told lawmakers in Berlin on Thursday that existing economic aid had been underused and now was not the moment to ease up on the fiscal discipline she credits with bringing stability to the continent.
Coeure said the ECB will start purchasing assets “within the next days” as part of its previously announced measures to stimulate economic growth in the eurozone.
National benchmark indices advanced in all 18 Western European markets on Friday. Germany’s DAX Index climbed 3.1 percent, France’s CAC 40 Index increased 2.9 percent and the UK’s FTSE 100 Index rose 1.9 percent.
Greece’s ASE Index rose 7.2 percent — its biggest gain since June 2012 — after closing on Thursday at its lowest level since July last year. Greek Prime Minister Antonis Samaras on Friday said Athens is negotiating with its international creditors for a precautionary credit line that would be available should market borrowing costs spike after it exits its rescue program.
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