Investor confidence boosts European stocks; U.S. shares flat

Focus on Japan after unexpected stimulus boost, early election call

Nov 18, 2014 @ 12:01 am

By Bloomberg News

European stocks rose for a second day as a report showed German investor confidence advanced for the first time this year. U.S. futures were little changed, while Asian shares rallied.

The Stoxx Europe 600 Index climbed 0.6% to 339.23 at 10:16 a.m. in London. It has rebounded 9.4% from this year's low on Oct. 16 as the Bank of Japan unexpectedly boosted its stimulus and most lenders in Europe passed capital-strength tests. Japanese Prime Minister Shinzo Abe is speaking Tuesday.

Standard & Poor's 500 Index futures lost 0.1%, while the MSCI Asia Pacific Index advanced 0.4%.

“This is a nice surprise,” said Pierre Mouton, who helps oversee $8 billion at Notz, Stucki & Cie. in Geneva, about the German data. “There's a chance that expectations had been dragged down because of recent weakness in the euro zone and Russia, so this shows that Europe's powerhouse is still doing OK. I also think that the euro weakness pushes optimism higher, especially in Germany where exports are very important.”

The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations, which aims to predict economic developments six months in advance, increased to 11.5 in November from minus 3.6 in October. U.K. data showed inflation unexpectedly accelerated, pushing the Stoxx 600 higher.

The Stoxx 600 rose 0.5% Monday after Mario Draghi said the European Central Bank's expanded purchase program could include government bonds.

“The market is being pushed to levels that can only be justified by continual low interest rates,” said Lex Van Dam, a fund manager at Hampstead Capital in London. “If central banks keep printing money then yes, that will be very good for equities.”

EARLY ELECTION

In Japan, Mr. Abe will call an early election and delay an unpopular sales-tax increase, public broadcaster NHK reported. Mr. Abe seeks to secure his political future and strengthen the “three arrows” of his economic policy after the country unexpectedly sank into recession.

“For Japan, it's more important to have cheap money that gives markets a push,” said Roger Peeters, chief executive officer at Close Brothers Seydler Research in Frankfurt. “Investors could interpret this as a signal that the current situation of low interest rates and cheap money in other economies will also continue for a while.

Banks and health-care companies contributed the most to the Stoxx 600 increase today, as 18 of 19 industry groups advanced. Novartis AG gained 1%. Greece's Eurobank Ergasias SA, National Bank of Greece SA and Banco Comercial Portugues SA added more than 2.4%.

Balfour Beatty Plc jumped 5.5% after saying its construction-services order book increased in the third quarter. Wirecard AG increased 3.2% after agreeing to buy some assets from Visa Inc. Altice SA (ATC) retreated 4% as Carlyle Group LP and Cinven Group Ltd. are selling a stake valued at as much as 341.3 million euros ($426 million) in the cable company.

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