European shares rose to two-month highs yesterday, with export-driven stocks such as autos leading the way as China announced a surprise rate cut just a day after the ECB signalled the possibility of stronger stimulus measures.
The pan-European FTSEurofirst 300 index rose 1.95 percent, building on a 2.1 per cent gain in the previous session, while the euro zone’s blue-chip Euro STOXX 50 index advanced 2.17 per cent.
China’s central bank cut interest rates yesterday for the sixth time since November, and it again lowered the amount of cash that banks must hold as reserves in another attempt to jumpstart a slowing economy.
The European Central Bank on Thursday kept interest rates unchanged at a record low, but its chief Mario Draghi opened the door to a possible deposit rate cut and said the bank would re-examine its quantitative easing scheme in December.
“All export-oriented sectors that suffered in August and September such as luxury and big industrial will certainly benefit from the Chinese rate cut,” said Consultinvest fund manager Enrico Vaccari. The STOXX Europe 600 Automobiles Index rose 3.2 per cent to outperform other equity sectors. Carmakers benefited from a drop in the euro on the prospect of more monetary stimulus, since a weaker euro typically makes European cars more affordable for overseas buyers.
Germany’s DAX closed its strongest week since end 2011 with a gain yesterday of 2.8 percent, helped by a rise in carmakers such as Daimler and BMW.
“The DAX is a big runner today, as it typically performs well on euro weakness,” said Hance Markets analyst Richard Perry. European stocks were also propped up by some solid earnings updates.
Shares in Norwegian insurer Gjensidige surged 12.3 per cent after reporting third-quarter profits ahead of market expectations. French luxury goods group Kerning also rose 10.6 percent after reporting a dip in sales that was not as bad as some analysts had feared.
However, telecoms network equipment maker Ericsson fell 6 per cent after its third-quarter revenue and profits missed market expectations, while shares in British broadband supplier TalkTalk fell 4.4 per cent after a cyber attack on its website.