European Stocks Rise After Fed Minutes Spur Low Rate Bets

October 9, 2014

Frankfurt (Oct 9)  European stocks rose, paring earlier gains, as a reduction in economic forecasts for Germany offset speculation that the Federal Reserve will keep interest rates near zero amid concerns about slower global growth. U.S. index futures were little changed, while Asian shares advanced.

Norsk Hydro ASA climbed 1.5 percent after U.S. peer Alcoa Inc. reported its highest earnings in three years. Solvay SA gained 1.5 percent after confirming its profit-growth target for 2014. Randgold Resources Ltd. led a rally in commodity producers as Numis Securities Ltd. and HSBC Holdings Plc recommended buying the shares. Suedzucker AG slumped to its lowest price in more than five years after saying that third-quarter operating profit will be lower than last year.

The Stoxx Europe 600 Index added 0.2 percent to 328.7 at 12:13 p.m. in London, paring earlier gains of as much as 1.1 percent. The measure slid 2.4 percent in the past two days as the International Monetary Fund cut its forecasts for global growth, and data showed German industrial production contracted the most in more than five years.

Shares in Europe pared gains after a report by four economic institutes warned that Germany’s economy is on the edge of recession as exports to China and Russia sag, and Chancellor Angela Merkel’s domestic policies hold back growth.

The DIW, IWH, IfO and and RWI institutes, which advise the government, cut the 2014 growth outlook for Europe’s biggest economy to 1.3 percent from a forecast of 1.9 percent in April, with expansion confined to the first half. The economy, which shrank 0.2 percent in the second quarter from the previous three months, posted zero growth in the third and will expand 0.1 percent in the fourth, according to the outlook.

Fed Minutes

Minutes from the Fed’s Sept 16-17 meeting showed a number of policy makers said U.S. gross domestic product expansion “might be slower than they expected if foreign economic growth came in weaker than anticipated.” Officials renewed their pledge in September to keep interest rates near zero for a “considerable time” after ending bond purchases as early as this month. The benchmark federal funds rate has been in a range of zero to 0.25 percent since December 2008.

Labor Department data at 8:30 a.m. in Washington may show the number of Americans who filed applications for unemployment benefits rose to 295,000 last week from 287,000 the previous period, economists projected.

The number of shares traded in Stoxx 600-listed companies was 38 percent higher than the average of the past 30 days, according to data compiled by Bloomberg.

Soiurce:  Bloomberg

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