The European markets rallied strongly on Friday, after the U.S. Federal Reserve came through with a third round of quantitative easing. The further economic stimulus had been expected and provided the boost that investors had been hoping for. There were also a number of better than expected economic reports released by the United States in the afternoon. Shares of banks, miners and automakers turned in strong performances on Friday.
The Federal Reserve took drastic new steps to stimulate the sluggish U.S. economy on Thursday, announcing plans to buy $40 billion of agency mortgage-backed securities each month, starting Friday.
In addition to embarking on a third round of quantitative easing, the Fed also extended its vow to keep interest rates at rock-bottom rates to mid-2015. Policy makers also decided to keep in place the Operation Twist program that swaps short-term bonds for longer-term assets.
The European Central Bank's bond-buying plan has lifted confidence in euro, ECB chief told German daily Sueddeutsche Zeitung. President Mario Draghi said it has already shown positive results. Fund managers are bringing back their money into Europe, which is good for the Eurozone economy.
The International Monetary Fund and the European Central Bank have denied a newspaper report that suggested they are in talks over a EUR 300 billion bailout for Spain.
Friday, Dutch daily Her Financieele Dagblad reported without naming any sources that the two institutions were in deep negotiations regarding such a deal. The rescue would allow the ECB to buy Spanish bonds when the country's borrowings costs surge.
The Euro Stoxx 50 index of eurozone bluechip stocks increased by 1.81 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, added 0.60 percent.
The DAX of Germany climbed by 1.39 percent and the CAC 40 of France finished up by 2.27 percent. The FTSE 100 of the U.K. rose by 1.64 percent and the SMI of Switzerland gained 0.71 percent.
In Frankfurt, E.ON fell by 0.38 percent. Berenberg lowered its rating on the stock.
Fraport was downgraded to "Hold" from "Buy" by Commerzbank. The stock finished up by 0.09 percent.
Commerzbank rose by 2.84 percent and Deutsche Bank advanced by 5.04 percent. UBS downgraded Deutsche Bank to "Neutral" from "Buy."
Volkswagen increased by 4.92 percent. BMW and Daimler gained 3.45 percent and 3.36 percent, respectively.
Fashion and lifestyle firm Gerry Weber International reported a 22 percent increase in third-quarter profit, but margin declined from last year. The stock closed lower by 1.16 percent.
In Paris, BNP Paribas advanced by 4.39 percent. Societe Generale gained 3.45 percent and Credit Agricole rose by 3.43 percent.
Peugeot and Renault climbed by 5.17 percent and 5.59 percent, respectively.
In London, Anglo American rose by 9.17 percent and Antofagasta surged by 7.84 percent. BHP Billiton gained 5.97 percent and Rio Tinto added 6.59 percent. Eurasian Natural Resources climbed by 10.90 percent, Vedanta Resources gained 13.36 percent and Kazakhmys advanced by 13.68 percent.
Russian steel maker Evraz surged by 13.22 percent. Gold miner Petropavlovsk ended the session higher by 14.64 percent.
Royal Bank of Scotland Group said it plans to launch an initial public offering of its fully-owned subsidiary Direct Line Insurance Group Plc in an all-secondary offering by the lender. The stock climbed by 1.86 percent.
Barclays rose by 5.09 percent and Lloyds Banking added 2.88 percent.
JD Wetherspoon increased by 3.28 percent, after announcing full year results.
Chemring Group gained 5.61 percent. The company announced a deadline extension by the Takeover Panel for Carlyle Group to make an offer for the company.
Eurozone inflation increased as initially estimated to 2.6 percent in August, final data issued by Eurostat showed Friday. The rate rose from 2.4 percent in July.
The number of persons employed remained stable in the euro area during the second quarter, after falling 0.3 percent sequentially in the prior quarter, Eurostat reported Friday.
British construction output decreased notably from last year in July, data released by the Office for National Statistics showed Friday.
Production in the construction sector, on an unadjusted basis, plunged 10.1 percent year-on-year in July. There was a 14.3 percent fall in the volume of new work, and a 1.6 percent decline in repair and maintenance works.
Consumer prices in the U.S. increased in line with economist estimates in the month of August, according to a report released by the Labor Department on Friday, with the price growth largely due to a substantial rebound by energy prices.
The Labor Department said its consumer price index rose by 0.6 percent in August after coming in flat in three of the four previous months. The increase in prices, which reflected the fastest rate of growth since June of 2009, matched the expectations of economists.
Fueled largely by strong sales at automotive retailers and gas stations, U.S. retail sales grew by slightly more than expected in the month of August, according to figures released Friday by the Commerce Department.
Commerce Department figures put the advance estimate of retail sales for August at a seasonally adjusted level of $406.7 billion, a 0.9 percent increase from revised July levels and the strongest monthly growth since February.
Although July retail sales growth was downwardly revised to 0.6 percent from the 0.8 percent growth initially reported, the August growth was nevertheless higher the 0.8 percent increase predicted by most economists.
With Hurricane Isaac restraining output in the Gulf Coast region, the Federal Reserve released a report on Friday showing a much steeper than expected drop in industrial production in the month of August.
The report showed that industrial production tumbled by 1.2 percent in August following a downwardly revised 0.5 percent increase in July. Economists had expected production to edge down by 0.1 percent compared to the 0.6 percent growth originally reported for the previous month.
Consumer sentiment in the U.S. has unexpectedly seen a substantial improvement in the month of September, according to a preliminary report released by Thomson Reuters and the University of Michigan on Friday.
The report showed that the consumer sentiment index jumped to 79.2 in September from the final August reading of 74.3. The increase came as a surprise to economists, who had expected the index to edge down to a reading of 73.5.
U.S. businesses built up their inventory stock notably more than expected in July, according to figures released Friday by the Commerce Department. Total manufacturers' and trade inventories were estimated at a seasonally adjusted level of $1.592 trillion, a 0.8 percent increase from June levels.
While most economists had expected inventories to increase faster than the 0.1 percent rate posted from May to June, most had expected a lower, 0.5 percent, increase for July.
by RTT Staff Writer
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