MW: European stocks rally after China rate cut, ECB stimulus talk
LONDON (MarketWatch) — Equities across Europe jumped Friday, with gains fueled by action and assurances from two major central banks, as policy makers in China and Europe seek to bolster economic growth.
During the European trading day, the People’s Bank of China said it’s cutting interest rates and that it will inject more liquidity into the banking system if needed. The move comes after a number of recent disappointing updates from the world’s second-largest economy, including a further pullback in prices for China’s key property sector.
European stocks had been pushed higher earlier in the session, after ECB President Mario Draghi signaled the central bank is set to expand its asset-purchase programs if there’s indication inflation is stuck at stubbornly low levels.
“If on its current trajectory our policy is not effective enough to achieve this, or further risks to the inflation outlook materialize, we would step up the pressure and broaden even more the channels through which we intervene, by altering accordingly the size, pace and composition of our purchases,” said Draghi at a banking conference in Frankfurt, Germany.
Markets: Mining stocks were propelled higher after the PBOC rate cuts, as China is a major buyer of metals. Rio Tinto PLC RIO, +5.25% RIO, -1.86% rallied 3.8%, BHP Billiton PLC BLT, +5.31% BHP, +3.64% surged 3.5%, Anglo American PLC AAL, +6.03% rose 3.6% and steel heavyweight ArcelorMittal SA MT, +4.66% MT, -1.55% added 5%.
The gains helped push the Stoxx Europe 600 SXXP, +1.74% up 1.4% to 342.96. Also among top advancers, shares of Norwegian oil-services company Aker Solutions ASA AKSO, +5.53% climbed 5.4%, and oil and gas producer Tullow Oil PLC TLW, +6.22% picked up 5%.
But the euro EURUSD, -0.96% dropped against the dollar on prospect for stepped-up action by the ECB, sending the shared currency down to $1.2430, compared with$1.2563 late Thursday in North American trade.
In his speech, Draghi referred to Thursday’s disappointing reading on manufacturing and services activity from the eurozone. The November flash PMI composite index came in at 51.4, the lowest level in 16 months, according to data compiled by Markit.
The PMI data “is a blow to EU economic sentiment,” after this week’s ZEW survey indicated the economic mood is improving in Germany, wrote Jameel Ahmad, chief market analyst, at FXTM, in an early Friday note.
But the eurozone’s woes may not solely rest on the ECB’s failure to successfully introduce new stimulus measures, Ahmad said. China’s economy has been slowing, and Japan has entered recession, two countries with which Europe actively trades. Weak investor confidence alongside low inflation is also likely limiting demand for trade among eurozone nations, and sanctions imposed on Russia “might be having a detrimental impact on EU sector growth,” he said.
In Frankfurt, the DAX 30 equity index DAX, +2.12% shot up 1.9% to 9,661.21. France’s CAC 40 index PX1, +2.24% rose 1.6% to 4,201.49, and the U.K.’s FTSE 100 UKX, +1.07% rose 0.9% to 6,739.72.
The Stoxx 600 was on track for 2.4% weekly rise, which would mark the biggest weekly advance since the end of October.
Among movers in Europe, TalkTalk Telecom Group PLC TALK, -3.03% shares fell 1.7% after its rating was cut to sell from hold at Berenberg.
Shares of Bouygues SA EN, +3.26% leapt 3.5% after the chief executive of telecom holding firm Altice SA ATC, +5.10% said it would be interested in buying Bouygues Telecom if its parent company wanted to sell it.
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