Europe close: Stocks higher after Japanese rate-setters make move

European stocks finished the session comfortably higher and at their best levels of the day after the Bank of Japan's surprise decision to adopt negative interest rates, as it looks to drive inflation to 2%, and amid 'mixed' data both in the Eurozone and the US.

The benchmark DJ Stoxx Europe 600 index gained 2.20%, Germany’s DAX was up 1.64% and France’s CAC 40 was 2.19% higher.

Rate-setters in Japan said they would apply a negative 0.1% interest rate on the excess reserves financial institutions place at the bank with effect from 16 February.

The bank voted by five to four in favour of the decision, which it attributed to declining oil prices and the slowdown in China. Some analysts were taken by surprise by the 'timing' of the move but many had been anticipating just such a decision in the first half of 2016.

"There is an increasing risk that an improvement in the business confidence of Japanese firms and conversion of the deflationary mindset might be delayed and that the underlying trend in inflation might be negatively affected."

The BoJ added that it would cut interest rates further into negative territory if that was deemed necessary.

Oil prices were modestly higher on this side of the Pond by the close of play on Friday, with prompt-month Brent crude oil futures 0.4% lower at $33.09.

In corporate news, Sky was on the front foot after its first half revenues met market expectations and the broadcaster announced the appointment of James Murdoch as chairman.

British Land was also in the black after it signed another tenant to the London ‘Cheesegrater’.

Spanish wind turbine maker Gamesa Corp Tecnologica rocketed following a report that Siemens was interested in bidding for the company.

Shares in French outdoor advertising company JCDecaux rallied after its well-received fourth quarter numbers.

Banca Monte dei Paschi di Siena was higher after the bank’s chief executive told an Italian newspaper a tie-up with UBI Banca might make sense.

On the downside, Yara was weaker after the fertiliser producer’s fourth-quarter results missed analysts’ expectations.

On the macroeconomic front, flash figures from Eurostat showed inflation in the Eurozone picked up in January.

Core inflation – excluding items such as energy and food – increased to 1% from 0.9% the previous month, compared with expectations for 0.9%.

However, Barclays' Fabio Fois told clients that: "we think that the mini inflation recovery that has been unfolding since October is likely to come to an end as non-core prices are likely to weigh on headline inflation, possibly until the end of H1."

Credit extended to the private sector in the Eurozone dipped sharply in December, led by loans to non-financial corporations.

Here again, Fois had a unique take on the data, saying that: "The reported decline in the annual growth rate of NFC loans should not be taken as an indication that the already modest euro area investment recovery is at risk.

"In fact, the breakdown by duration shows that the drop was driven primarily by short-term loans, while the medium- to longer-term credit to NFCs continues to improve at a healthy pace."