Europe open: Stocks rally as Fed gives clearer indication of next policy move

European stocks rallied at the open, taking their cue from upbeat sessions in the US and Asia, as the latest Federal Reserve minutes signalled that a rate hike next month was likely, while insisting that any tightening would be slow and gradual.

“Markets are clearly liking the US central bank’s faith in the US economic recovery and belief in a gentle ‘testing of the water’ first move towards policy normalisation,” said Mike van Dulken, head of research at Accendo Markets.

At 0900 GMT, the benchmark Stoxx Europe 600 index and France’s CAC were up 1%, while Germany’s DAX was 1.2% higher.

Minutes from the Federal Reserve’s October meeting – which took place before last month’s bumper nonfarm payrolls report – revealed that most members of the policy-setting committee expected economic conditions to be right for a December rate hike.

“The Federal Open Market Committee Minutes were billed as the biggest news event of the week,” said Societe Generale strategist Kit Juckes. “In the event, the Fed managed a rare feat - they left the market convinced that they will hike rates in December but equally convinced that it won't be a big deal.”

On the corporate front, Johnson Matthey surged to the top of the FTSE 100 after the specialty chemicals firm posted a rise in first half pre-tax profit and revenue and declared a special dividend.

Miner BHP Billiton was also on the front foot after it said that maintaining its balance sheet was a priority.

French catering group Sodexo surged after saying it would cut costs further in order to combat a volatile global economy and posting an increase in full year profit.

German diversified industrial group Thyssenkrupp advanced after it reported a 46% increase in full year net profit and lifted its dividend.

Minutes from the European Central Bank’s October meeting are due at 1230 GMT. In the US, initial jobless claims are at 1330 GMT, while leading indicators and the Philadelphia Fed manufacturing survey are at 1500 GMT.