European Shares Extend Gains as ECB Cuts Rates; Nestle Advances
(Bloomberg) — European stocks extended their gains as the European Central Bank delivered a second-consecutive rate cut, and the technology sector stabilized after two days of losses.
The Stoxx Europe 600 Index ended the session 0.8% higher, the most in three weeks, with the majority of sectors advancing. Food and beverage stocks were among the top gainers, bolstered by a 2.5% rise in Nestle SA, after management comments on margins offered relief. Banks also rallied, led by Nordea Bank Abp which improved its full-year outlook and outlined a share buyback program.
The ECB lowered interest rates for the third time this year, as expected, with slowing inflation allowing it to offer support to the region’s stuttering economy. The key deposit rate was cut by a quarter-point to 3.25% — as predicted by all analysts in a Bloomberg survey. Money markets are pricing another rate cut in December.
“Inflation is no longer a problem for the euro zone, it is the weakness of the economy, especially in Germany and France,” said Christina Carlsten, senior fund manager at Banque Piguet Galland & Cie SA. “Global monetary easing and the stimulus measures in China make up a positive environment for risk assets.”
European chip stocks advanced after Taiwan Semiconductor Manufacturing Co.’s better-than-expected quarterly earnings helped the sector overcome recent disappointment over ASML Holding NV’s results. ASML closed flat, ceding gains earlier in the session, after two days of heavy losses.
Among other individual movers, Nokia Oyj slipped as sales undershot analysts’ estimates, and Sartorius AG soared after the German lab equipment maker’s order trends reassured investors. Pernod Ricard SA rose as analysts expressed relief that the French company had reiterated guidance.
“While it is still very early in the season and there are only a bunch of data points to work with, we are seeing stocks rally today after missing on the quarter, but not warning on the year,” said Carl Dooley, head of EMEA trading at TD Cowen, describing this as a possible “inflection point in price action.”
In comments following the ECB’s decision, President Christine Lagarde reiterated that the economy should recover in time, as interest rates decline and shoppers spend more, but said risks to growth remain tilted to the downside.
“Given that economic data in the US has recently strengthened, the US election outcome is completely open and it is yet not clear what the Chinese stimulus will add to global demand, macro uncertainty remains very high,” said Wolf von Rotberg, equity strategist at Bank J. Safra Sarasin. “It thus appears reasonable to wait and see before committing to further action.”
For more on equity markets:
- Hedging Is the New Mantra in This Tricky Market: Taking Stock
- M&A Watch Europe: Volue, Talgo, Aperam, N Brown, Anglo
- France Urged to Trim $57 Billion Stock Portfolio: ECM Watch
- US Stock Futures Little Changed; Capricor Therapeutics Falls
- Inflation Dips Below Target: The London Rush
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–With assistance from Michael Msika and Kit Rees.
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