By Sara Sjolin, MarketWatch
LONDON (MarketWatch) — European stock markets ended higher on Thursday, as investors cheered an interest-rate cut from China and a favorably received auction of Spanish government debt.
No hints of further easing from U.S. Federal Reserve Chairman Ben Bernanke took stocks off session highs.
The Stoxx Europe 600 index /zigman2/quotes/210599654/delayed XX:SXXP +0.29% closed 1.1% higher at 242.64, extending gains into a third straight trading day.
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Equities in Europe spiked in midday trade, after the People’s Bank of China unexpectedly cut two benchmark interest rates, both by 25 basis points. China rate cut
“This could give a much needed boost to trade in Europe and the rest of Asia as China’s domestic demand increases and as Chinese companies can now finance global operations at cheaper costs,” said Jordan Lambert, trader at Spreadex, in a note. “It is also worth being mindful that sometimes such interest-rate moves are coordinated with other central banks; therefore, there could be further surprises to the upside.”
The surprise move boosted resource firms and lifted U.K. miners out of negative territory. Rio Tinto PLC /zigman2/quotes/208934945/delayed UK:RIO -1.07% /zigman2/quotes/202627887/composite RIO -2.42% added 4%, BHP Billiton PLC /zigman2/quotes/208108397/composite BHP -1.67% rose 2.5% and Vedanta Resources PLC gained 2.3%.
Shares of Burberry Group PLC /zigman2/quotes/205386705/delayed UK:BRBY +0.34% /zigman2/quotes/203108786/delayed BURBY -0.75% jumped 5.1%. Credit Suisse upgraded Burberry to outperform from neutral, saying the brand looks healthier than ever.
The U.K.’s FTSE 100 index /zigman2/quotes/210598409/delayed UK:UKX +0.09% rose 1.2% to 5,447.79, further supported by Barclays PLC /zigman2/quotes/208409333/delayed UK:BARC -1.17% /zigman2/quotes/206581728/composite BCS 0.00% , up 2.7%, while Lloyds Banking Group PLC /zigman2/quotes/202285510/delayed UK:LLOY -1.33% /zigman2/quotes/200709414/composite LYG 0.00% added 3.5%.
Earlier, the Bank of England kept its key lending rate unchanged at a record low 0.5% and held the central bank’s asset-purchase program at 325 billion pounds ($506 billion). Bank of England maintains holding pattern
Success auction in Spain keeps IBEX up
Elsewhere, Spanish stocks rose as the government sold a total of 2.07 billion euros ($2.6 billion) of debt, passing a key test of market sentiment amid concerns about the country’s economy. Spanish bond auction
Spain’s Treasury had aimed to sell a total of €1 billion to €2 billion. The yield on 10-year government bonds produced an average yield of 6.04%, up from 5.74% in a previous sale, Bloomberg reported.
In the secondary market, yields on benchmark 10-year government bonds declined 22 basis points to 6.04%, according to FactSet. A basis point is 1/100th of a percentage point.
The IBEX 35 index /zigman2/quotes/210597995/delayed XX:IBEX -0.11% inched 0.3% higher to 6,438.10, well below its intraday high of 6,537.80. Spanish shares trimmed gains as Bernanke testified to Congress and left out signals of further easing stimulus, said Predrag Dukic, senior equity sales trader at CM Capital Markets in Madrid.
“Markets move once Bernanke starts talking and when he doesn’t mention QE3 (quantitative easing) or liquidity injections the markets get disappointed,” he said.