Europe close: Strong US data, bounce in oil lift equities

European stocks advanced on Friday as oil prices rallied and the latest batch of economic data out of the States came in firmly ahead of economists´ forecasts.

The benchmark DJ Stoxx Europe 600 index ended the day up by 1.53% to 331.54 points, Germany’s DAX closed higher by 1.95% to 9,513.30 and France’s CAC gained 1.56% to 4,314.57.

Oil prices pushed higher amid continued hopes of production cuts from OPEC and the evidence that was quickly piling up that US tight oil producers were accelerating their own output reductions. On Thursday, it emerged that Venezuela, Russia, Saudi Arabia and Qatar will meet again next month in a bid to stabilise prices.

West Texas Intermediate was up 0.84% to $33.35 a barrel and Brent crude was 1.86% firmer at $35.96.

Strong economic data from the States weighs on the pound, euro

US personal consumption expenditures jumped by 0.5% month-on-month in January, more than doubling forecast from analysts once revisions to prior months´ data is taken into account.

Figures contained in the same report also showed that headline PCE inflation printed at 1.3% year-on-year (consensus: 1.0%).

The 'Core' PCE price deflator advanced at a 1.7% year-on-year pace last month - its largest gain since the end of 2012 - coming in ahead of market forecasts for a rise of 1.5%.

Commenting in the above data, Paul Ashworth, chief US economist at Capital Economics said: "The Fed won’t raise rates in March, but we do expect it to resume hiking in June, with the fed funds target range climbing to between 1.00% and 1.25% by end-2016."

"Markets have ignored the steady increase in core CPI inflation over the past year, but they can't ignore this," chimed Ian Shepherdson, chief economist at Pantheon Macroeconomics.

Goldman Sachs´s latest forecasts called for the Fed to skip hiking rates when it next met on 16 March, followed by three rate rises throughout the remainder of 2016, perhaps even as early as April.

Sentiment was also underpinned by expectations that the G20 meeting of finance ministers in China will deliver a coordinated stimulus programme to bolster the slowing global economy.

Cable finished the session 0.69% lower to 1.3868 alongside losses of 0.88% to 1.0927 for the European single currency in its own cross versus the US dollar.

RBS pummeled

In corporate news, education publisher Pearson surged as it swung to a loss in 2015, but said it sees a turnaround in sight by 2018.

Spanish travel IT company Amadeus rallied after it posted a rise in full year profit and said it was targeting a dividend payout of 50% of reported profits this year.

BHP Billiton was firmer after it denied reaching a settlement with Brazilian authorities over the Samarco mine disaster but said significant progress has been made in negotiations.

German chemicals company BASF was in the black despite posting a 76% drop in fourth quarter net profit.

Burberry was on the front foot after Nomura upgraded the stock to ‘buy’ from ‘neutral’.

On the downside, shares in Royal Bank of Scotland tumbled after it posted a full year loss and delayed the prospects of any dividend payouts.

Although the loss was narrower than the previous year, it was the bank’s eighth year of losses.

British Airways and Iberia parent International Consolidated Airlines Group was a little weaker despite reporting a big jump in 2015 profit.

Salzgitter slipped as the steelmaker said its loss after tax widened in 2015.

Investors also digested the latest data from the European Commission, which showed economic sentiment in the Eurozone deteriorated more than expected in February.

The EC’s headline economic sentiment indicator fell to 103.8 from a revised 105.1 in January.

This was below economists’ expectations for a reading of 104.4 and marked the lowest reading since June 2015. It was also the second consecutive month of decline.

The EC said the fall came on the back of deteriorating confidence among consumers in all business sectors apart from construction, while in terms of countries, the Netherlands saw a sharp drop.

Meanwhile, the EC’s business climate indicator fell by 0.2 points to 0.07, missing consensus expectations for a reading of 0.28.

Pantheon Macroeconomics said the indicators were poor.

“Another downside surprise from economic survey data. The headline sentiment index fell to an eight-month low, driven by weakness in both services and industrial confidence.”