European shares rose yesterday, led by banks on expectations they will be the big winners in the ECB’s drive to stave off deflation, while Allianz sank on news fund manager Bill Gross was leaving the group’s asset-management unit Pimco.
Gross, one of the bond market’s most renowned investors, will be joining Pimco rival Janus Capital Group, Janus said yesterday.
Traders worried that his departure could mean more redemptions from Gross’s flagship Pimco Total Return Fund , the world’s largest bond fund with more than $220 billion in assets.
Allianz shares tumbled 6.2 per cent yesterday in their biggest one-day slide in nearly three years, representing a wipeout in the group’s market value of about €3.8 billion.
Following the news of Gross’s exit from Pimco, which has large investments in eurozone peripheral bonds, Italian 10-year bond yields rose 4 basis points on the day to 2.40 per cent and equivalent Spanish yields advanced 5 bps to 2.20 per cent.
The FTSEurofirst 300 index of top European shares ended 0.3 per cent higher at 1,377.00 points.
Eurozone banking stocks featured among the top gainers, boosted by expectations they will be the big winners in the European Central Bank’s drive to stave off deflation.
Credit Agricole gained 1.2 per cent and UniCredit rose 2.2 per cent. The STOXX eurozone banking index gained one per cent, among the top sectors across Europe.
Investors increasingly expect eurozone banking stocks to rally in coming months as the ECB steps up efforts to support the region’s economy. The central bank announced more stimulus measures this month, including purchases of asset-backed debt, in addition to cheap loans to banks announced earlier.
Societe Generale equity analysts recommend buying European banks set to benefit from the ECB’s latest measures.
They also say the ECB’s asset-quality review – results of which are due next month – should give banks more visibility.
Demand was lower than expected last week for the ECB’s four-year loans to banks. But several investors say banks will wait for the asset-quality review to end before taking part in the ECB scheme. Another round of loans is due in early December.
Gains in Europe yesterday were led by Milan’s FTSE MIB , up 1.9 per cent, Paris’s CAC 40, up 0.9 per cent and Madrid’s IBEX, 0.6 per cent higher.
The FTSEurofirst 300 has gained 4.6 per cent this year, with Italy’s MIB up 9.6 per cent and Spain’s IBEX gaining 9.4 per cent. Both the UK’s FTSE 100 and Germany’s DAX have underperformed, down 1.5 per cent and 0.6 per cent respectively in 2014.
According to a Reuters poll published on Thursday, European shares are poised to add another two per cent to this year’s gains, supported by the ECB’s ultra-loose monetary policy and a falling euro, which should boost company earnings.