By Tommy Stubbington
Stocks in Europe rallied sharply Thursday, as investors welcomed
the message from the Federal Reserve that it will be patient in
deciding when next to raise interest rates.
The Stoxx Europe 600 index ended the session almost 3% higher on
the day, spurred by a 2% surge for the S&P 500 on Wednesday
after Fed Chairwoman Janet Yellen broached the prospect of
"beginning to normalize" monetary policy. U.S. markets climbed
further on Thursday and the S&P was up 1.5% at the European
close.
Despite the hint that rate increases could be on the way next
year, investors were reassured by the Fed's cautious language.
"The shift is a signal of confidence in the sustainability of
the U.S. recovery," said Ian Williams, an economist and strategist
at brokerage Peel Hunt.
"June still looks like the most likely date for a first rate
hike," economists at BNP Paribas wrote.
In Europe, strategists additionally attributed the market
strength to a recovery in oil prices. On Thursday Brent crude
climbed as high at $63.70 per barrel, having hit a 5 1/2 -year low
earlier this week of $58.50.
The Russian ruble, too, found further respite from its plunge in
recent days, although trading remained volatile. The currency had
began to recover on Wednesday as the market welcomed measures by
the Bank of Russia to shore up the country's banks. In late trade
Thursday it was 1.6% stronger on the day against the dollar at
61.06.
Against major currencies, Ms. Yellen's message gave the dollar a
boost, pushing it to a 10-day high against the euro.
Elsewhere in currency markets, the Swiss franc weakened after
the Swiss National Bank surprised investors by pushing interest
rates into negative territory. The SNB's policy of capping the
level of the franc has come under pressure with the recent
weakening of the euro, pressuring the Swiss central bank to mimic
the European Central Bank's policy of paying negative rates on
deposits.
The franc fell back from the SNB's cap of 1.20 to the euro by
0.3%, trading at 1.2044.
"Price action over the last few days suggests the SNB might have
had to purchase material amounts of euros to defend the 1.20 floor
and this may have triggered the move today," said Beat
Siegenthaler, a currency strategist at UBS.
Elsewhere, Greek markets shrugged off the government's failure
to win enough support in the first round of parliamentary voting
for a new president on Wednesday, a move that could force the
country into snap elections.
Athens' main stock index rose 1.5%.
Write to Tommy Stubbington at tommy.stubbington@wsj.com and
Josie Cox at josie.cox@wsj.com
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