Europe Stocks Rise to Five-Year High as Fed Resists Taper

European stocks rose to the highest level in more than five years as the Federal Reserve decided not to slow the pace of its monthly bond purchases. U.S. futures were little changed, while Asian shares jumped.

UniCredit SpA and Standard Chartered Plc led European banks higher, with each gaining at least 3 percent after the Fed’s decision. RWE AG added 1.2 percent as it was said to receive a reimbursement from Gazprom OAO after arbitration. ThyssenKrupp AG climbed 1.6 percent after German candidate for chancellor Peer Steinbrueck was reported as saying the steelmaker must not be split up.

The Stoxx Europe 600 Index rallied 1 percent to 316.49, the highest level since June 2008, at 8:17 a.m. in London. The equity benchmark has gained 6.5 percent so far this month, extending its advance this year to 13 percent, as central banks pledged to maintain stimulus measures to support the global economy. Standard & Poor’s 500 Index futures gained 0.2 percent. The MSCI Asia Pacific Index surged 2.4 percent.

“The Federal Reserve wrong-footed the markets by deciding that the economic case for tapering simply wasn’t there,” Michael Hewson, a market analyst at CMC Markets Plc in London, wrote in a note. “This surprise move is likely to see Europe’s markets surge this morning.”

The Fed yesterday unexpectedly refrained from reducing its $85 billion monthly bond buying, saying it needs to see more indications that the U.S. economy is improving sustainably. The median response of 64 economists in a Bloomberg survey had forecast the central bank would start tapering stimulus measures after a two-day policy meeting yesterday.

Job Market

“Conditions in the job market today are still far from what all of us would like to see,” Fed Chairman Ben S. Bernanke said at a press conference in Washington after European markets closed. “The committee has concern that rapid tightening of financial conditions in recent months would have the effect of slowing growth.”

Bernanke reiterated that a decision on slowing the pace of asset purchases would depend on economic data, and that there is no set timetable. The central bank maintained its guidance that its target interest rate will remain low at least as long as unemployment exceeds 6.5 percent, and the outlook for inflation is no higher than 2.5 percent.

UniCredit, Italy’s biggest bank, climbed 3.3 percent to 4.97 euros. Standard Chartered added 3.9 percent to 1,573 pence. A gauge of European lenders added 1.5 percent, extending gains since a June 24 low to 21 percent.

RWE Reimbursement

RWE increased 1.2 percent to 25.77 euros after a bond prospectus showed a tribunal in June awarded its unit partial reimbursement from Gazprom of about $1.5 billion for payments made since May 2010. RWE has already received a full refund, according to a Gazprom Export official who declined to be named, citing company policy.

Separately, Westdeutsche Allgemeine Zeitung reported, without saying where it got the information, that the German utility proposed to freeze wages for three years in union negotiations.

ThyssenKrupp advanced 1.6 percent to 17.49 euros. Steinbrueck, who leads the opposition party Social Democrats, said it was “imperative” to prevent a break-up of the German steelmaker, according to an interview in Westdeutsche Allgemeine Zeitung.

Cie. Financiere Richemont SA (CFR), owner of the Cartier brand, climbed 2.3 percent to 94.80 Swiss francs as a report showed watch exports rose 0.5 percent in August from a year earlier.Swatch Group AG (UHR), the biggest maker of Swiss watches, gained 2.2 percent to 599.50 francs.

Randgold Resources Ltd. jumped 9.6 percent to 4,906 pence as gold extended yesterday’s gain. Fresnillo, which produces gold and silver in Mexico, rallied 8.9 percent to 1,098 pence.

A gauge of commodity producers posted the best performance on the Stoxx 600.


Source: Bloomberg