European Stocks Climbs Higher

By Josie Cox 

        European stocks continued to rally Friday, mirroring a sharp surge on Wall Street Thursday, spurred by the U.S. Federal Reserve's pledge to adopt a "patient" approach when raising interest rates in 2015.
        The Stoxx Europe 600--having already closed the previous session almost 3% higher on the day--was another 0.6% higher by mid-morning in-line with individual country indexes across Europe.
        In the U.S., the Dow Jones Industrials on Thursday enjoyed their biggest two-day percentage gain in more than three years mainly fueled by the Fed's rhetoric, but also--traders said--by last-minute buying from hedge funds and other money managers whose performances have flagged this year. On Friday, the S&P 500 was indicated opening 0.4% higher. Futures, however, do not always accurately predict moves after the opening bell.
        Economists said that especially in Europe, confidence that the European Central Bank would announce a broadening of its asset purchase program to include sovereign bonds early next year, was buoying sentiment too.
        In an interview with The Wall Street Journal earlier this week, ECB executive board member Benoît Coeuré sent one of the clearest signals to date that the ECB is poised to embark on large-scale asset purchases early next year, as the bank grapples with a weak economy and dangerously low inflation.
        "The ECB has fired all its monetary shots except [sovereign] quantitative easing. We are at the point now where QE is the most likely next step," said Andrew Bosomworth, head of portfolio management in Germany at Pacific Investment Management Co., which manages around $1.87 trillion in assets globally.
        UBS chief European economist Reinhard Cluse said that so far his base-case scenario had been that the ECB to announce sovereign QE at in March.
        "But, should the December inflation data disappoint on the downside, this could, in our view, increase the likelihood that the ECB might announce sovereign QE as early as January," he added.
        Earlier Friday, data showed that German consumer sentiment has hit its highest level in eight years, on hopes economic expansion in Europe's largest economy will accelerate in the coming months.
        In Russia on Friday, the ruble continued to recover from a brutal selloff earlier this week but remained volatile.
        It eased to 62.9 against the dollar in the first few minutes of trading on the Moscow exchange but then recovered somewhat, edging close to its Thursday closing level of 61.4.
        Earlier this week the Russian finance ministry said it was ready to sell as much as $7 billion to stabilize the ruble after the central bank carried out massive monetary tightening, hiking its key interest rate by 6.5 percentage points to 17%.
        "The measures taken by Russian authorities to stem the ruble slide and contain the turmoil in Russian markets, coupled with perceptions of a dovish Fed, have sparked a turnaround over the past few trading sessions, " Barclays economists wrote. Nevertheless, the fate of the Russian economy is strongly linked to the price of oil.
        On Friday Brent crude was trading around $59.80 a barrel, having recovered somewhat from the 5 1/2 -year low of $58.50 hit earlier this week. Year-to-date, though, the price of the commodity has tumbled more than 45%.
        Other currencies of economies dependent on oil, like the Canadian dollar and the Norwegian krone, were broadly unchanged on Friday.
        Nigeria's naira was also steady according to FactSet data, but remains close to an all-time low against the U.S. dollar, after the country's central bank imposed new foreign-exchange controls on Wednesday. The bank barred dealers from depositing their currency-trading funds overnight, preventing traders from placing bets for or against a single currency at the close of a trading session.
        Finally Friday, the Bank of Japan announced that it is standing pat on monetary policy, opting to gauge the effects of its expanded stimulus campaign, despite a rapid fall in global oil prices that threatens its efforts to generate 2% inflation. That sent the U.S. dollar to a one-week high against the yen of 119.47. The buck was broadly steady against the euro at $1.2280.
        (END) Dow Jones Newswires

        December 19, 2014 05:36 ET (10:36 GMT)

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