Europe close: Stocks rally on promises of ECB stimulus and PBoC's rates cut

European equity markets ended the week on an upbeat note, as investors continued to take heart from European Central Bank president Mario Draghi’s dovish comments on Thursday and were buoyed by some positive data.

The benchmark Stoxx Europe 600 index closed up 1.99%, while France’s CAC 40 rose 2.53% and Germany’s DAX ended 2.88% higher.

As of 1630 BST the euro was on the back foot against the main currencies, falling 0.61% against the dollar and losing 0.33 and 0.30% against the yen and the pound respectively, while Brent crude lost 0.82% to $47.69 a barrel.

ECB boost

Although Draghi stood pat on policy, he hinted that additional stimulus measures could be announced at the December meeting.

In the press conference after the rate announcement, the ECB chief said the governing council had discussed expanding its bond-buying programme and cutting the rate on reserves held at the central bank.

“The reason the euro fell so sharply during Mario Draghi’s press conference was because the market knows that weakening the euro is one of the ECB’s unofficial policy tools to boost Euro-area growth,” said CMC Markets’ analyst Jasper Lawler.

Weakening the euro improves the competiveness of European exports and it also reduces the competitiveness of China’s exports into Europe.”

Global equity markets also received a somewhat unexpected boost after the People’s Bank of China announced a sixth rate cut this year.

“While the move is a recognition that the Chinese economy is slowing, markets can apparently live with this if they believe that the PBoC is prepared to take steps to counter the weakness,” said IG’s senior market analyst Chris Beauchamp.

Some upbeat data also helped the tone as it showed the recovery in the Eurozone gained momentum in October, driven by higher demand for services.

The latest flash Markit Purchasing Managers’ Index survey showed its composite index rose to a two-month high of 54 in October compared with a reading of 53.6 in the previous month and analysts’ expectations for a 53.4 reading.

Earnings in focus

Electrolux rose 2.08% after the home appliances maker posted a 9% increase in third-quarter net sales year-on-year.

Sweden’s Volvo was 2.81% higher after it said third-quarter operating profit rose to 5.1bn Swedish crowns from 2.9bn in the same period last year.

Gucci owner Kering surged 10.6% as it posted a 12% rise in third-quarter revenue to €2.89b, while miner Boliden rallied after reporting an increase in third-quarter net profit.

On the downside, Ericsson slid 6% after the Swedish telecom equipment maker’s third-quarter revenue missed analysts’ expectations, while shipping company Moller Maersk tumbled 6.87% after cutting its full-year profit outlook.