EUROPE MARKETS: European Stocks Advance After ECB Delivers 'dovish' Tapering Of Bond Purchases
Spanish stocks leap; Barclays, Deutsche Bank shares drop
European stocks held to higher ground Thursday after the European Central Bank said it's extending its asset-purchase program at a reduced amount each month, but shares of big lenders Barclays PLC and Deutsche Bank AG fell after financial results failed to please.
What stock indexes are doing
The Stoxx Europe 600 index rose 0.6% to 389.33, with only the tech sector in the red. On Wednesday, the index fell 0.6% (http://www.marketwatch.com/story/gucci-parent-helps-lift-luxury-stocks-but-european-markets-stay-in-their-rut-2017-10-25), a second consecutive decline.
The index started to push higher ahead of the ECB announcement, on the back of a surge in Spanish equities. In Madrid, the IBEX 35 jumped 2.1% to 10,365.00. There, Banco de Sabadell SA (SAB.MC) leapt 5% and BBVA (BBVA) (BBVA) climbed 3%.
Germany's DAX 30 index put on 0.6% at 13,027.20, and France's CAC 40 tacked on 0.8% at 5,419.83.
In London, the FTSE 100 (http://www.marketwatch.com/story/barclays-shares-shoved-lower-as-ftse-100-steadies-ahead-of-ecb-2017-10-26) rose 0.5% to 7,486.73.
What's driving markets?
The ECB said it'll reduce its bond-buying program to EUR30 billion a month starting in January, and extend it to at least September 2018, meeting widely held expectations. The central bank currently buys EUR60 billion a month under its quantitative-easing program.
The euro dropped to an intraday low of $1.1740, giving up the $1.18 handle. Stubbornly low inflation and high unemployment are expected to have been factors in the ECB's decision to stick with stimulus efforts.
"If the outlook becomes less favorable, or if financial conditions become inconsistent with further progress towards a sustained adjustment in the path of inflation, the Governing Council stands ready to increase the [asset purchase program] in terms of size and/or duration," the ECB said in its policy statement (https://www.ecb.europa.eu/press/pr/date/2017/html/ecb.mp171026.en.html).
Ahead of the ECB's announcement, Spanish stocks started to rally on reports that Catalan President Carles Puigdemont will dissolve the region's parliament (http://www.marketwatch.com/story/spain-stocks-rally-on-reports-catalan-leader-will-dissolve-parliament-hold-early-elections-2017-10-26) and call early elections. The regional vote will be held on Dec. 20, according to local media (http://www.lavanguardia.com/politica/20171026/432364601449/puigdemont-elecciones-articulo-155-catalunya.html). More unrest could follow the move, as separatist groups called for protests against Puigdemont.
Leaders in Catalonia and in Madrid have been locked in political crisis after Catalan separatists earlier this month held an independence referendum that Spanish constitutional courts deemed illegal.
See:Mario Draghi needs to avoid a 'taper tantrum' when the ECB meets (http://www.marketwatch.com/story/mario-draghi-needs-to-avoid-a-taper-tantrum-when-the-ecb-meets-2017-10-23)
And read: Why Italy faces worst shock in Europe as ECB prepares to taper bond buys (http://www.marketwatch.com/story/why-italy-faces-worst-shock-in-europe-as-ecb-prepares-to-taper-bond-buys-2017-10-24)
What strategists are saying
"In short, today's [ECB] decision is a sea change but a very gentle one; not a big-bang U-turn in ECB monetary policy. In fact, the QE recalibration the ECB has announced illustrates that the ECB wants to start the exit as cautiously as possible, ideally without seeing the euro appreciate or bond yields increase. It is a very dovish tapering." -- Carsten Brzeski, chief economist at ING
Bank shares decline
Some major banks suffered after releasing financial results that failed to live up to the hopes of investors.
Deutsche Bank AG (DBK.XE) (DBK.XE) shares fell 1.7%. Third-quarter profit at Germany's biggest bank (http://www.marketwatch.com/story/deutsche-bank-shares-fall-even-as-profit-doubles-2017-10-26) more than doubled to EUR649 million, beating analysts' expectations. Despite the rise in profit, the results show Germany's biggest bank still has significant ground to cover to convince investors its rebuilding efforts will pay off after years of disappointment and deep cost-cutting.
Barclays PLC (BCS) (BCS) slid 6.5%, facing their worst session since June 2016, immediately after the U.K.'s Brexit referendum. The British lender said third-quarter revenue fell 5% (http://www.marketwatch.com/story/barclays-shares-slump-on-investment-bank-weakness-2017-10-26) from a year ago, after its investment bank was hit by low market volatility, which hurt trading revenues.
Read:Barclays stock slumps, wiping GBP2 billion off the bank's market cap (http://www.marketwatch.com/story/barclays-stock-slumps-wiping-2-billion-off-the-banks-market-cap-2017-10-26)
Shares of Nordea Bank AB (NDA.SK) fell 6.5%, after the Swedish firm said net interest income rose slightly in the third quarter (http://www.marketwatch.com/story/nordea-bank-posts-rise-in-net-interest-income-2017-10-26) although its profit-before-loan losses fell.
But Banco Santander SA (SAN) (SAN) shares bulked up 4.1%, extending gains as stocks in Madrid overall jumped. The Spanish lender said net interest income rose to EUR8.68 billion from EUR7.80 billion a year ago (http://www.marketwatch.com/story/banco-santander-net-profit-falls-2017-10-26). But net profit was down from a year ago.
Stock movers
Nokia Corp. (NOK)(NOK) shares plunged 15% after the Finnish telecommunications company said its quarterly net loss widened to EUR183 million. It warned that the mobile networks market would fall (http://www.marketwatch.com/story/nokia-loss-wider-than-seen-in-weak-networks-market-2017-10-26) more than previously expected this year.
Shares of STMicroelectronics NV (STM) bounced up 7.3%, with the chip maker posting a better-than-expected rise in third-quarter sales and net profit (http://www.marketwatch.com/story/stmicroelectronics-profit-rise-beats-forecasts-2017-10-26) to $236 million.
Economic data
Lending to eurozone firms increased (http://www.marketwatch.com/story/eurozone-lending-to-companies-picks-up-pace-2017-10-26) at a faster pace of 2.4% in September than in August, data from the European Central Bank showed Thursday.
(END) Dow Jones Newswires
October 26, 2017 08:23 ET (12:23 GMT)