European Stocks Higher, Supported by U.S.Data and ECB Signal on Bond Buying

By Josie Cox 

        European stocks edged higher on Wednesday, possibly on track for a fourth straight session of gains, spurred by robust economic data out of the U.S. and the strongest signal to date that the European Central Bank is prepared to buy government bonds early next year.
        In remarks prepared for a conference in London, ECB Vice President Vitor Constancio said the central bank expects measures it has already agreed to get the size of its balance sheet back to the level it was early in 2012. This would mean that the balance sheet would be about EUR1 trillion ($1.24 trillion) higher than it is now.
        "We have, of course, to closely monitor if the pace of its evolution is in line with that expectation. In particular, during the first quarter of next year we will be able to gauge better if that is the case," he said.
        "If not, we will have to consider buying other assets, including sovereign bonds in the secondary market, the bulkier and more liquid market of securities available," he added.
        The euro slipped lower against the dollar on the back of the remarks, to trade around $1.2468, while the Stoxx Europe 600 index settled around 0.3% higher.
        Germany's DAX 30 and France's CAC 40 were 0.7% and 0.2% higher, respectively, also buoyed by data released Tuesday which showed that U.S. gross domestic product grew at an annual rate of 3.9% in the third quarter, above the expected 3.3% pace.
        "The cumulative growth in the U.S. economy over the second and third quarters of 2014 was the best six-month stretch since late 2003," said Peter Dragicevich, a London-based strategist at Commonwealth Bank of Australia, adding that separate indicators also point to robust growth momentum into year-end.
        Derek Halpenny, European head of currency research at Bank of Tokyo-Mitsubishi, said that the reading "offers hope for sustainable growth north of 3.0%."
        Also released Tuesday, figures showed that the German economy expanded 0.1% in the third quarter, after a 0.1% contraction in the previous quarter, confirming preliminary figures published Nov. 14.
        While the reading matched consensus expectations, economists broadly agreed that it wasn't high enough to take significant pressure off the European Central Bank to lift its stimulus efforts.
        On Wednesday, U.K. GDP figures showed a 0.7% expansion in the third quarter, in line with expectations. The FTSE 100 remained around 0.3% higher after the release, little changed from before the data came out, while the pound was steady against the U.S. dollar at $1.5687.
        Credit Suisse strategists said earlier in a note that they remain bearish on the currency and see "implied volatility as underpriced" ahead of next May's general election in the U.K. They are targeting a level of $1.55 in three months time and $1.53 in 12 months.
        Elsewhere in currency markets, the Australian dollar fell around 0.8% against the U.S. dollar to a more than four-year low.
        The currency has suffered on the back of weaker commodity prices, but losses on Wednesday were also triggered by comments from a senior central bank official that left the door slightly ajar to interest-rate cuts.
        Speaking to business economists overnight, Philip Lowe, deputy governor at the Reserve Bank of Australia, said if conditions warranted, there was room to cut rates. He added that there would be benefits to a further cut, which was perceived by some as a shift in rhetoric.
        So far this year, the Australian dollar has depreciated more than 5% against its rallying U.S. counterpart.
        In equities, travel company Thomas Cook Group PLC was the clear underperformer on the pan-European index. Its stock slumped more than 20% in early trade after news that Chief Executive Harriet Green had stepped down.
        The company, which owns a number of tour operators and charter airlines, also said that it now expects growth will be at a more moderate pace due to a tougher trading environment.
        Shares in offshore drilling company Seadrill Ltd. also fell deep into the red after the company reported third-quarter earnings. Shares in Seadrill and many of its peers have come under intense pressure in recent weeks due to the relentless slide in the price of oil.
        On Wednesday, Brent crude was 0.1% higher at $78.43 a barrel. Gold was flat at $1,197.20 per troy ounce.
        -- Todd Buell and Brian Blackstone contributed to this article
        Write to Josie Cox at josie.cox@wsj.com
        (END) Dow Jones Newswires

        November 26, 2014 05:32 ET (10:32 GMT)

#Josie_Cox
#ECB_Bond
#Bond_Buying
#U.S.Data