By Carla Mozee, MarketWatch
Stocks across Europe bounded higher Wednesday, bolstered by rises in financial shares after the Bank of Japan tweaked monetary policy in a way that should help yield-dependent businesses.
The Stoxx Europe 600 /zigman2/quotes/210599654/delayed XX:SXXP +0.41% gained 0.4% to 342.46, closing at its highest level in nearly two weeks.
Stocks rose after the BOJ unexpectedly said it would start targeting 10-year interest rates, committing to keep them around zero as part of a new policy framework aimed at bolstering inflation. The central bank will maintain quantitative easing until its inflation target of 2% is overshot, and it kept its main interest rates unchanged.
The bank is targeting a steeper yield curve, meaning yields on longer-dated bonds, such as the 10-year, are higher than shorter-dated bonds.
“Anchoring the 10-year yield at 0% has two effects. First off, they’re guaranteeing that if the banks (or anyone else) buy 10-year bonds at this level, they won’t lose money,” said Marshall Gittler, head of investment research at FXPrimus, in a note.
“Secondly, by preventing 10-year yields from going below zero, the yields of longer-term bonds should stay positive. That will help the profitability of insurance companies and pension funds, which need longer-term assets to match their long-term liabilities,” he said.
The Stoxx Europe 600 Bank Index /zigman2/quotes/210599339/delayed XX:SX7P +0.79% popped up 2% for its largest gain in nearly a month. Spain’s Banco Popular Español jumped 9.1%, France’s Société Générale SA /zigman2/quotes/206663756/delayed FR:GLE +0.80% bulked up 1.9%, and Germany’s Commerzbank AG /zigman2/quotes/200193353/delayed DE:CBK +1.44% rose 3.3%. Italy’s UniCredit SpA /zigman2/quotes/200769686/delayed IT:UCG +0.26% added 3.6%.
The Bank of Japan’s move swings the spotlight on the European Central Bank, which this month left monetary policy unchanged.
Fed ahead: Investors have another key central bank meeting to grapple with later Wednesday. The U.S. Federal Reserve’s decision on whether to raise interest rates is due at 7 p.m. London time, or 2 p.m. Eastern Time.
Indexes: Italy’s FTSE MIB leapt 0.9% to 16,349.82. In Frankfurt, the DAX 30 /zigman2/quotes/210597999/delayed DX:DAX +0.37% rose 0.4% to 10,436.49.
Spain’s IBEX 35 /zigman2/quotes/210597995/delayed XX:IBEX +1.06% climbed 0.8% to 8,758.50. Banco Santander SA /zigman2/quotes/205677933/delayed ES:SAN +1.54% /zigman2/quotes/202859081/composite SAN 0.00% was up 3.2% following reports that the Spanish lender walked away from talks to buy Royal Bank of Scotland PLC’s Williams & Glyn branches. RBS shares fell 0.3%.
Euro: The euro /zigman2/quotes/210561242/realtime/sampled EURUSD +0.4113% was trading at $1.1167, close to late Tuesday’s level around $1.1158. Against the yen, the shared currency /zigman2/quotes/210561215/realtime/sampled EURJPY +0.2428% was buying ¥112.39, compared with ¥113.43 late Tuesday.
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