European stocks recover after the ECB reversed bets on the rate hike



MILAN / LONDON (Reuters) – European stocks rose on Thursday after the European Central Bank said interest rates would remain at historic lows at least until the summer of 2019, when it announced the end of its plan Massive stimulus.

PHOTO OF THE FILE: The German stock price index, DAX board, is listed on the stock exchange in Frankfurt, Germany, March 21, 2018. REUTERS / Tilman Blasshofer

Stock reference values ​​in Europe enjoyed Your best day in 2-1 / 2 months, as you benefited both from a weaker euro and the surprise spread of lower interest rates.

The pan-European STOXX 600 and the STOXX .STOXXE euro zone rose by 1.4 and 1.3 percent, while the German heavy index .GDAXI gained by 1.7 percent, as the euro fell to a minimum session following the ECB's declaration.

Together with CAC 40 of France, they had their strongest gains since April 5.

Edmund Shing, head of equity derivatives at BNP Paribas, said lower rates for a longer time were a blessing for the shares as they assured that liquidity remained strong.

"One of the key factors for risk assets has been and continues to be liquidity, beyond all other things: the longer they take in rate hikes, the longer the decent liquidity will be," he said.

"The hawks had been guiding a hike in June before the meeting and, given the ECB's clear guidance on interest rates today, it had to be disqualified," said AFS Group analyst Arne Petimezas.

"We do not seem to be at the stage where hawks are on top of things," he added.

Interest-sensitive sectors such as automobiles and public services increased, while bank shares in the euro zone .SX7E, suffering from low interest rates, fell 0.2 percent, among the only populations in negative territory.

The Commerzbank of Germany ( CBKG.DE ), the Bankia of Spain ( BKIA.MC ) and the Unicredit of Italy ( CRDI.MI ) they were the most affected, up to 1.2 to 2 percent.

"It's a disappointment" for banks, said Shing of BNP Paribas, adding that the ECB's negative deposit rate costs banks money.

"The faster the deposit rate returns to 0, the better it will be for the profitability of the banks."

AUTOS SECTOR

However, if the ECB manages to support the economy and productivity, this could have a positive effect on the banks through the increase in the demand for financing and the relief of the burden of the credits defeated, he added.

The auto sector .SXAP rose 1.8 percent, its biggest gains in 2 1/2 months, also driven by a weak euro.

Rolls-Royce ( RR.L ) gained 6.5 percent after saying it would save 400 million pounds ($ 535 million) a year by cutting 4,600 jobs in its latest attempt to simplify the business and generate more cash.

"After spending about four and a half years in Purdah, an increase of 400 million pounds of FCF (free cash flow) would allow Rolls-Royce to take a significant step towards meeting its financial goals", said the Jefferies analysts.

"That should mean that Rolls-Royce can make an adequate annual return to shareholders through the dividend."

The Danish manufacturer of hearing equipment GN Store Nord ( GN.CO ) was the top winner in the STOXX, an increase of 12.2 percent after it increased its 2018 sales and forecasts of profits for your headset business.

Shares of heavyweight pharmaceutical company GSK ( GSK.L ) rose 2.3 percent. Investors welcomed the news that their treatment of two HIV drugs met their primary goal in the latest stage studies, an increase after regulators warned of possible birth defects with one of the two drugs.

In the DAX, Volkswagen ( VOWG_p.DE ) increased by 2.2 percent. It fell in the first operations after the automaker received a fine of one billion euros for diesel emissions.

Report of Danilo Masoni and Helen Reid; Editing by Alison Williams

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