By Barbara Kollmeyer, MarketWatch
MADRID (MarketWatch) -- The view that Europe's central banks are
going to keep monetary policy easy for the foreseeable future
triggered a rally for European stocks on Thursday, with investors
brushing aside geopolitical worries that triggered losses the prior
day.
The Stoxx Europe index jumped 2% to 291.28, more than reversing
a 0.6% loss in the prior session. That was accompanied by a surge
in the dollar across the board and a rally for U.S. stock futures,
which were trading a short session as regular trading is closed for
Independence Day.
Sending stocks flying in the afternoon, European Central Bank
President Mario Draghi told reporters at a press conference that
interest rates will remain low or go even lower for "an extended
period of time." He added that risks surrounding the economic
outlook continue to be on the downside.
"Investors were further impressed by Draghi's acknowledgment of
being open to all options with regards to helping such nations,
which opened the floodgates for more unconventional methods of
fiscal stimulus measures," said Shavaz Dhalla, financial trader at
SpreadEx.
But markets are also thin with the U.S. out. U.S. markets will
return to action on Friday when all-important nonfarm payroll data
will be released. Economists expect the economy added 155,000 jobs
in June, less than the 175,000 added in May.
"It is entirely possible that when the bears return tomorrow
they may remind the markets that Draghi's ambiguous statements are
not enough to carry investors' sentiment in the long-term," Dhalla
said.
Draghi's comments came on the heels of the Bank of England,
where new Governor Mark Carney appeared to bring on a big change.
Though rates stayed unchanged, the Monetary Policy Committee, in an
unusual step, released a policy statement that many read as dovish
as well. The pound tumbled more than 1% against the dollar,
dropping to levels not seen since May.
"In the United Kingdom, there have been further signs that a
recovery is in train, although it remains weak by historical
standards and a degree of slack is expected to persist for some
time," said the central bank, which added that consumer price
inflation could rise 12 months out, then pull back later.
Heavyweight banking stocks like HSBC Holdings PLC (HBC) and
Barclays PLC (BCS) soared over 4% each and Lloyds Banking Group PLC
(LYG) was up almost as much.
As a result, the FTSE 100 index soared 3% to 6,417.41, levels
not seen since early May.
Portugal, Egypt worries subside
Portugal's stock market also rallied as a political crisis in
that country appeared to be calming down. Risk appetite got another
general bid as Egypt named a new interim president and oil prices
fell from prior-day highs. Read the latest on Egypt
Among the big movers, Banco Comercial Portugues SA and Banco
Espirito Santo SA each rose nearly 11%. On Wednesday, Portugal's
stock-market regulator temporarily banned short selling of shares
in those banks and two other companies until late Thursday. The PSI
20 index soared over 4% to 5,455.88, reversing a large portion of a
5% drop on Wednesday.
At his press conference, Draghi said the country is "in safe
hands" and that it has "achieved remarkable results"
The yield on Portugal's 10-year government bond fell 18 basis
points to 7.116%, well off a spike above 8% seen the prior day.
Leaders in Portugal were fighting to keep the government's
coalition together after resignations by two ministers. The Wall
Street Journal reported that Prime Minister Pedro Passos Coelho and
the leader of the junior partner in the government held meetings
late Wednesday to keep that coalition intact. Read: Five things to
know about growing turmoil in Portugal
Broker moves also helped to lift shares of several stocks across
Europe. Peugeot SA surged over 8% after Goldman Sachs upgraded
shares to buy from neutral.
Shares of Kering SA rose over 4% after analysts at Exane Paribas
upgraded the French luxury company to outperform from neutral.
Those gains helped the French CAC 40 index to rally 2.7% to
3,801.38, but it also plenty of help from banks as that sector
powered ahead. Societe Generale SA climbed over 5% and BNP Paribas
SA leaped 4%.
Heavyweight oil group Total SA (TOT) also provided a major boost
for the French index, up over 2% and drug group Sanof SA (SNY)
climbed more than 3%.
The German DAX 30 index shot up 2% to 7,995.12 as Deutsche Bank
AG (DB) , beaten down the previous day by a downgrade from Standard
& Poor's Ratings Services, rose nearly 3%. Allianz SE pulled
its weight among financials with a more than 2% jump.
Shares of Daimler AG continued to gain after a prior-day broker
upgrade, with shares leaping 3.4% and Volkswagen AG rose 3%.
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