European stocks rose yesterday, with a benchmark index hitting a nine-week high as eurozone banking shares gained on mounting expectation of more stimulus from the European Central Bank.
Shares in Deutsche Bank, ING and BNP Paribas were up 2.0-2.2 per cent. They were the top three risers among European blue chips, boosted by market speculation that the ECB will launch a quantitative easing programme in early 2015.
“Recent strong comments by [ECB President Mario] Draghi seem to be paving the way for the bank to start buying sovereign or corporate bonds,” said IG France’s chief market analyst, Alexandre Baradez.
“There is very little chance to see the ECB back-tracking as long as inflation doesn’t start to pick up, which will support stock indexes in the medium term.”
At 1500 GMT, the FTSEurofirst 300 index of top European shares was up 0.4 per cent at 1,390.18 points, after rising to as much as 1,395.34 points earlier in the session, a level not seen since September 22.
The benchmark index has surged nearly 15 per cent from a low hit in mid-October, bolstered by the prospect of further ECB easing as well as recent policy measures taken by the Bank of Japan and the Bank of China.
Yesterday’s rally was limited, however, by losses in resource-related shares, hurt by a recent slump in crude oil and metal prices. BHP Billiton was down 1.2 per cent, BP was 0.6 per cent lower and Total was off 1.2 per cent.
Brent crude oil steadied around $80 a barrel yesterday ahead of a key meeting of Opec oil producers to decide on production levels for next year. Oil prices have tumbled more than 30 per cent since mid-June.
Despite the recent rally in equities, Allianz Global Investors’ CIO, Andreas Utermann, remains cautious on the outlook for risky assets.
“The lack of economic growth and the return of volatility is prompting us to be more pro-active in buying and selling assets to capture the big moves in prices,” he said.
“We still favour the dividend theme in Europe. Stocks pay a hefty 3.5 per cent yield on average, that’s much higher than in the fixed income market.”
Around Europe, Britain’s FTSE 100 index was up 0.1 per cent, Germany’s DAX index was 0.6 per cent higher and France’s CAC 40 was up 0.2 per cent.
Shares in E.ON rose 2.8 per cent after sources said late on Monday that E.ON’s Italian assets had drawn interest from a handful of energy companies and investment funds on the final day for a binding bid.
Shares in Spain’s Telefonica rose 0.8 per cent and BT gained 1.4 per cent after a report said the latter could offer at least €6 billion to the Spanish company for the O2 mobile network, on top of a 20 per cent stake in BT’s share capital.