European stocks gain most in nearly 4 months on QE hopes

European stocks charged higher at Friday trade, breaking a weekly string of losses, as oil prices rebounded and as investors looked toward the possibility the European Central Bank will enact more stimulus measures for the eurozone economy.

The Stoxx Europe 600 SXXP, +2.91% surged 3% to close at 338.36. All sectors advanced, led by oil and gas SXEP, +6.35% telecommunication and consumer services shares. The gains marked the best daily gain for the European benchmark since Oct. 5.

Among Friday’s action, shares of Royal Philips NV PHIA, +0.26% PHG, -0.71% managed to pare losses to 0.1%. They had lost ground more ground earlier in the session after the Dutch electronics group scrapped plans to sell its lighting components and automotive-lighting unit to a Chinese investor because of U.S. regulatory concerns.

Oil stocks brightened as energy prices CLH6, +10.72% UK:LCOH6 which recently touched 12-year lows, surged above $31 a barrel Friday on ECB stimulus prospects and extended gains made Thursday following reports of attacks on Libyan oil terminals.

Read: MarketWatch’s ECB live blog recap.

Friday’s climb in stocks “is probably more attuned to the rise in the oil price than the talk of stimulus given the more muted reaction in the euro,” said Jasper Lawler, market analyst at CMC Markets, in a note. “Still, the prospect of further monetary easing has been enough stimulate a recovery in sold off risky assets including oil, which in a positive feedback loop has supported gains in equities.”

The Stoxx 600 index booked a weekly rise of 2.6%, the first such gain in three and the best weekly performance since Nov. 20, according to FactSet data. The index is still down for the month, by 7.5%.

Oil moves: In the oil group, shares of oil producer Tullow Oil PLC TLW, +12.55% soared 14.4% and oil-services company SBM Offshore NV SBMO, +1.74% gained 5.7%. But Italian oil contractor Saipem SpA SPM, -5.37% tumbled 21%, with shares in its rights issue, aimed at raising 3.5 billion euros ($3.78 billion), priced at a 31% discount to Thursday’s closing price.

Royal Dutch Shell PLC RDSB, +5.57% RDS.B, +3.87% claimed a 5.3% rise. Shell shares advanced despite Moody’s Investors Service placing Shell’s credit rating and those of 119 other oil and gas companies world-wide on review for a possible downgrade, stemming from the collapse in oil prices.

In Europe, ratings for France’s Total SA FP, +7.57% and Norway’s Statoil ASA STL, +3.35% were also placed under review. Total shares ended up 4.4% and Statoil shares ended 8.4% higher.

Data: European stocks held to gains after data showed a slowdown in manufacturing and services activity in the eurozone in January. Data firm Markit said its manufacturing Purchasing managers index hit a three-month low at 52.3, while its services PMI reached a 12-month low at 53.6.

“The cooling in the pace of growth in euro area business activity at the start of 2016 is a disappointment but not surprising given the uncertainty caused by the financial market volatility seen so far this year,” said Chris Williamson, chief economist at Markit, in a note.

The euro EURUSD, -0.6093% was little changed around $1.0845 after the data release but eventually dipped to $1.0815. The shared currency late Thursday traded around $1.0884.

ECB President Mario Draghi on Thursday said the recent global market turmoil raises downside risks for eurozone inflation and the economy. In light of that, the central bank may “possibly reconsider” its stance on monetary policy at its March meeting, he said during a news conference in Frankfurt, igniting a rally in European stocks.

An ECB survey of economists published Friday showed they have reduced their inflation forecasts for 2016 and 2017, in part as “oil price movements will exert a strong dampening impact on inflation and counteract favorable base effects arising from past developments.”

Indexes: The U.K’s FTSE 100 UKX, +3.08% was lifted 2.2% to 5,900.01 and Germany’s DAX 30 DAX, +2.45% popped up 2% to 9,764.88. France’s CAC 40 PX1, +2.52% tacked on 3.1% to 4,336.69.

Source: MarketWatch