Europe close: Stocks bounce back as BoJ and Fed stay put

European stocks bounced back from their large losses early in the session despite some investors´ disappointment with the lack of any further action from the Bank of Japan to add to its stimulus.

Overnight, the US central bank reiterated it would continue to tighten interest rates gradually and expressed a preference for keeping the door open to a possible hike in June, by omitting a reference to risks to growth from abroad, some analysts said.

The benchmark DJ Stoxx Europe 600 index edged higher by 0.17% to 348.90, Germany’s DAX gained 0.21% and France’s CAC 40 drifted a tad lower, losing 0.04% to end the day at 4,557.36.

Crude oil futures continuer their steady climb higher, with West Texas Intermediate crude futures up by 0.57% to $45.59 per barrel by the close of the trading day in London.

The Bank of Japan left its policy rate at -0.1% earlier on Thursday, but did not extend its stimulus package to include negative rate bank loans, which many had been expecting.

“It is hard not to feel sorry for the Bank of Japan. It has tried unconventional policy once this year, and it didn’t work. Now it has tried to be unconventionally conventional, sitting on its hands, and this hasn’t worked either,” said Chris Beauchamp, senior market analyst at IG.

“The lack of action, perversely, proves that central bank stimulus still has the power to shock, both when it is tried and when it isn’t. This is a salutary lesson for the Fed and the ECB, both of whom are grappling with their own policy problems.”

On Wednesday, the Fed chose to stand pat on interest rates, keeping the federal-funds rate at between 0.25% and 0.50%, as widely expected, but left the door open to a June hike.

“The Federal Reserve was no more bold or committal following its monthly meeting only hours earlier. The central bank left rates unchanged which was expected but the statement it put out alongside it was fairly balanced and told us very little about the timing of the next rate hike,” said Oanda’s Craig Erlam.

“The most significant thing in the statement was the removal of the balance of risks which suggests the Fed no longer sees this as posing a threat. Offsetting that though were warnings that economic activity appears to have slowed and household spending moderated, despite income rising at a solid rate. The addition of a positive to offset any negatives is clearly not a coincidence but it does suggest that while June remains on the table for the next hike, the Fed is not confident at this stage that the timing is right.”

In corporate news, shares in advertising agency WPP climbed back from early losses to end the day 1.0% higher. Although growth in first-quarter revenue was welcome, the company struck a fairly cautious note about the outlook, pointing to the EU referendum and UK GDP weakness.

Lloyds Banking Group was also under the cosh after it reported a 6% fall in first-quarter underlying profit, although the figures still beat expectations.

Spanish bank BBVA was under pressure after reporting a 54% drop in first-quarter net profit, while Caixabank slumped after its quarterly profit missed estimates.

Broadcaster ITV was one of the top fallers in London as its stock went ex-dividend.

On the upside, Deutsche Bank rallied after it posted a first-quarter profit versus expectations of a loss.

Luxury goods maker Hermes was higher after saying revenue grew 6.1% in the first quarter.

Electrolux surged after the Swedish household appliance maker posted better-than-expected first-quarter net profit thanks to strong demand in Europe and North America.

Anglo American was a high riser after announcing that it has agreed to sell its niobium and phosphates businesses in Brazil to China Molybdenum for a cash consideration of $1.5bn.

In macroeconomic news, data from the European Commission showed economic sentiment in the Eurozone improved a little more than expected in April.

The EC’s economic sentiment indicator rose to 103.9 in April from 103.0 in March, beating expectations for a reading of 103.4.

Meanwhile, the business climate indicator nudged up to 0.13 from 0.12, just missing expectations of 0.14.

Elsewhere, figures from Germany´s Federal Statistics Office revealed that joblessness in the country held steady at 6.2% in April.

The unemployment rate came in unchanged at 6.2% - the lowest level since reunification – as expected.

However, the number of unemployed people fell by a seasonally-adjusted 16,000 to 2.706m from the previous month, beating expectations for no change.