European Stocks Rally After Bank of Japan Boosts Stimulus

By Sofia Horta e Costa  

European stocks rose to a three-week high amid optimism the Bank of Japan’s stimulus will fill some of the gap left by the end of Federal Reserve bond buying. U.S. index futures and Asian shares also rallied,
The Stoxx Europe 600 Index gained 1.4 percent to 335.29 at 10:16 a.m. in London. BNP Paribas (BNP) SA led lenders higher, as all 19 industry groups on the gauge climbed. The equity benchmark is heading for a 2.3 percent drop in October amid concern the European Central Bank’s asset purchases will not be enough to revive the region’s economy. With the Federal Reserve ending purchases this month, investors are turning to Europe and Japan for sustained support.
The Bank of Japan unexpectedly boosted its stimulus, raising its annual target for monetary expansion to 80 trillion yen ($717 billion), up from 60 to 70 trillion yen. An increase was predicted by just three of the 32 analysts surveyed by Bloomberg News. Separately, the
country’s public pensions fund increased its target for holdings of foreign shares to 25 percent from 12 percent of its portfolio.
“Markets don’t really seem to care about what kind of stimulus we get or where it’s coming from, as long we get something,” said Teis Knuthsen, chief investment officer at Saxo Bank A/S’s private-banking unit. “Central banks are trying to squeeze money into the system and as long as economic growth is good enough, all that money will be going into financial assets. What happened in Japan is very powerful for equities, and it’s really rippling throughout global markets.”

Euro-Area Inflation

Investors weighed a report that showed euro-area inflation increased this month for clues about the ECB’s policy stance at its meeting next week. The central bank aims to take inflation closer to 2 percent, while the rate has stayed below 1 percent for a year.
Standard & Poor’s 500 Index futures added 1.2 percent today, while the MSCI Asia Pacific Index (MXAP) rallied 1.3 percent for its best week since April 2013. In Germany, Deutsche Boerse AG said trading on its Xetra system was interrupted for about an hour by a computer malfunction.
BNP Paribas rose 4.1 percent to 50.46 euros after posting an 11 percent gain in third-quarter profit that exceeded analysts’ estimates. Net income was 1.5 billion euros ($1.89 billion), up from 1.36 billion euros a year earlier, the lender said. Loan-loss provisions fell 9.2 percent.
Royal Bank of Scotland Group Plc added 4.4 percent to 381.5 pence after swinging to a third-quarter profit. The British lender said net income was 896 million pounds ($1.4 billion), beating the average analyst estimate of 582 million pounds. RBS posted a loss of 828 million pounds in the year-earlier period.

IAG, Danone

International Consolidated Airlines Group SA gained 4.3 percent to 407.6 pence. The owner of the British Airways and Iberia said full-year earnings will be 550 million euros to 600 million euros more than last year’s 770 million euros. IAG had earlier predicted a gain of at least 500 million euros.
Danone added 2.2 percent to 53.87 euros after agreeing to buy a 25 percent stake in Yashili International Holdings Ltd., a Chinese infant milk-formula maker.
Anheuser-Busch InBev NV (ABI) slipped 1 percent to 86.30 euros after third-quarter profit growth slowed more than analysts had projected because of weakness in Russia and China. The brewer said adjusted earnings before interest, taxes, depreciation and amortization rose 1.3 percent, down from a 9.5 percent pace in the second quarter. Analysts had called for 7 percent growth.