EU stocks rise for second week on ECB, BOE guidance

‘HUGE BOOST’::Western European markets soared after both banks said rates would be held steady or lowered for a while, with 15 of 18 indices climbing


Sun, Jul 07, 2013 - Page 15

European stocks rose for a second week as the European Central Bank (ECB) and the Bank of England (BOE) said interest rates will remain low for an extended period of time.

PSA Peugeot Citroen surged 12 percent, its biggest weekly gain since May. Nokia Oyj rallied 9.1 percent after the Finnish phonemaker agreed to buy Siemens AG’s stake in their joint venture, Nokia Siemens Networks.

Fresenius Medical Care AG tumbled 12 percent after the US government proposed cutting payments to dialysis-center operators under the Medicare program from next year.

The STOXX Europe 600 Index rose 1.2 percent to 288.31 this week. The equity benchmark has pared its retreat from its year high on May 22 to 7.2 percent.

National benchmark indices rose in 15 of the 18 western European markets this week. The UK’s FTSE 100 gained 2.6 percent and France’s CAC 40 climbed 0.4 percent, while Germany’s DAX Index slid 1.9 percent.

Portugal’s PSI 20 Index retreated 2.7 percent this week as the government lost the leader of its junior coalition partner.

Democratic and Social Centre People’s Party head Paulo Portas resigned from his ministerial job on Tuesday after Portuguese Prime Minister Pedro Passos Coelho named Maria Luis Albuquerque minister of finance, saying Albuquerque would just continue the country’s deficit-cutting plans.

The STOXX 600 declined 3 percent in the second quarter as US Federal Reserve Chairman Ben Bernanke indicated the central bank may reduce its asset purchases if the US economy improves in line with its forecasts.

“The fact that the ECB and the BOE will keep rates low for longer than expected weakened the euro and sterling and this provided a huge boost to the stock market,” Hampstead Capital LLP fund manager Lex Van Dam said.

European stocks rallied 2.3 percent on Thursday as ECB President Mario Draghi said interest rates will remain at their current levels or lower for as long as necessary.

“What the [ECB] Governing Council did today was to inject a downward bias in interest rates for the foreseeable future,” he said. “Our exit is very distant.”

In the UK, the Bank of England signaled that it will leave interest rates at a record low for longer than investors had expected.

“The implied rise in the expected future path of bank rate was not warranted by the recent developments in the domestic economy,” the BOE said in a statement on Thursday.