European stocks have rallied to a two-month high after China increased stimulus, adding to optimism that central banks around the world will do what is needed to support the global economy.
Equities posted the biggest two-day gain since July after also getting a boost from European Central Bank (ECB) President Mario Draghi, who hinted at additional stimulus measures on Friday. The STOXX Europe 600 Index added 2 percent at the close of trading, extending its rally after the People’s Bank of China cut its benchmark lending rate and reserve requirements for banks.
“That’s giving a nice boost to the market,” said Keith Bowman, an analyst at Hargreaves Lansdown PLC in London. “Clearly, China has been a concern for investors from some time now, and there has been speculation that the Chinese might inject some further stimulus. That’s what we’ve seen today.”
The STOXX 600 closed at its highest level since Aug. 19, with all industry groups rising. It is up for a third week, the longest stretch since March. BMW AG and Volkswagen AG, which get more than three-quarters of their revenue outside Germany, rose more than 3.2 percent as exporters were among the best performers. The DAX posted the best gain among western European markets, up 2.9 percent.
“The hope that cheap money is here to stay for longer, together with stronger earnings is helping stocks,” Frankfurt-based Quoniam Asset Management GmbH associate director for equities trading Soeren Steinert said.
His firm manages more than 25 billion euros (US$28 billion).
“There were many fears in the summer and none of them came true so people are buying again because they had closed their positions,” Steinert said.
Among stocks active on corporate news, Kering SA jumped 11 percent as its revenue growth beat estimates. Vinci SA gained 2.3 percent after Europe’s biggest builder forecast better-than-projected annual sales.
Gjensidige Forsikring ASA surged 12 percent after the Norwegian insurer said diminishing uncertainty over capital requirements could lead to an extraordinary dividend.
Anglo American PLC gained 2.2 percent after people familiar with the matter said it is considering a sale of its niobium and phosphate business in Brazil in a deal that may fetch about US$1 billion. Cable & Wireless Communications PLC climbed 6.6 percent after confirming it is in talks for a takeover bid by Liberty Global PLC. The shares surged 21 percent in final trading settlement on Friday after Dow Jones reported the discussions.
Ericsson AB fell 6 percent after the network-equipment maker’s profitability missed projections. AP Moeller-Maersk lost 5.2 percent after cutting its full-year earnings forecast. TalkTalk Telecom Group PLC slid 4.4 percent after saying a data hack might have compromised customers’ credit card details.
The STOXX 600 has rallied 8.5 percent in October, on track for its best month since 2009. It has clawed back more than half the losses from a rout that began in August and continued through Sept. 29, when the gauge fell to its lowest level since January.
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