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Sept. 21, 2017, 12:12 p.m. EDT

Banks lead European stocks higher after Fed hints at rate hike

After Fed decision, regional bank index jumps to one-month high

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By Carla Mozee, MarketWatch


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Bank shares are in the spotlight Thursday.

European stocks ended mostly higher on Thursday, with banks stocks marching higher after the U.S. Federal Reserve indicated it will continue to raise official interest rates.

The Stoxx Europe 600 index /zigman2/quotes/210599654/delayed XX:SXXP +0.29%  rose 0.2% to 382.88, closing at its highest level since July 20. On Wednesday, the benchmark closed fractionally lower as investors marked time before the highly anticipated Fed policy announcement.

After European trade closed Wednesday, the Fed said it would begin to shrink its huge $4.5 trillion balance sheet in October. The U.S. central bank also signaled plans for one more increase in interest rates before the end of 2017, which should lift borrowing costs for auto loans, mortgages and business loans. Fed policy makers also hinted at another three rate increases in 2018.

The prospect of higher interest rates bolstered bank stocks on Wall Street and in Europe, where the Stoxx Europe 600 Bank Index /zigman2/quotes/210599339/delayed XX:SX7P -0.49%  charged up 1.4% to a more-than one-month high.

In that index, Deutsche Bank AG /zigman2/quotes/207242873/delayed XE:DBK -0.28%   /zigman2/quotes/203042512/composite DB 0.00%  popped up 2.7%, Société Générale SA /zigman2/quotes/206663756/delayed FR:GLE -0.03% picked up 2.2% and Banco Santander SA /zigman2/quotes/205677933/delayed ES:SAN -1.62%  moved up 1.2%.

“Before the Fed announced its decision, there were high expectations that monetary policy makers would drag interest rate expectations lower for 2017,” said Hussein Sayed, chief market strategist at FXTM.

“Instead, the U.S. central bank decided to look past low inflation and said the harm of the hurricanes would have no lasting economic impact,” he said in a note, referring to damage from recent Hurricanes Harvey and Irma.

Sayed said markets have higher expectations for an interest-rate increase in December, with investors now seeing a 70% chance of a hike, up from 50% before the Fed decision.

Stock movers: Elsewhere in the banking group, shares of Commerzbank AG /zigman2/quotes/200193353/delayed DE:CBK +0.73% rallied 3.5%, extending gains Wednesday following a Reuters report that Italy’s UniCredit SpA /zigman2/quotes/200769686/delayed IT:UCG -0.45% is interested in merging with the state-backed lender. But the German government favors Commerzbank tying up with France’s BNP Paribas SA /zigman2/quotes/206351084/delayed FR:BNP -0.99% , Reuters reported Thursday. BNP shares bulked up 1%, while UniCredit shares ended 2% higher.

CRH PLC /zigman2/quotes/201759252/delayed UK:CRH +1.30%   /zigman2/quotes/202550827/composite CRH +0.88%  shares gained 2.4%. The Irish building materials supplier plans to buy Ash Grove Cement Co. in a deal valuing the U.S. cement provider at $3.5 billion, the companies said.

Capita PLC shares /zigman2/quotes/204738740/delayed UK:CPI +1.31% plunged 12% after the outsourcing and professional services company posted a 26% fall in pretax profit for the first half of the year. It did say that trading was broadly in line with expectations.

Ryanair Holdings PLC /zigman2/quotes/205429530/delayed IE:RY4C -0.43%  erased an earlier loss to close up 0.1%, after a group of the air carrier’s pilots on Wednesday reportedly rejected a cash bonus to work extra days after Ryanair’s cancellation of more than 2,000 flights.

Johnson Matthey PLC /zigman2/quotes/207054035/delayed UK:JMAT -0.51%  surged 15% after the catalyst maker revealed plans to tap into the electric car battery market.

Indexes: Germany’s DAX 30 index /zigman2/quotes/210597999/delayed DX:DAX +0.66%  rose 0.3% to 12,600.03, and France’s CAC 40 index /zigman2/quotes/210597958/delayed FR:PX1 +0.09%  picked up 0.5% to 5,267.29.

The U.K.’s FTSE 100 index /zigman2/quotes/210598409/delayed UK:UKX +0.09%  fell 0.1% to 7,263.90. Spain’s IBEX 35 /zigman2/quotes/210597995/delayed XX:IBEX -0.11%  advanced 0.1% to 10,297, after closing 1.2% lower on Wednesday as Spanish police arrested 13 Catalan officials in a battle over a regional independence referendum.

The euro /zigman2/quotes/210561242/realtime/sampled EURUSD +0.0085%  bought $1.1951, up from $1.1895 late Wednesday in New York. The dollar had earlier pushed higher against major rivals after the Fed’s plans to wind down its bond-buying program.

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XX : STOXX
363.55
+1.06 +0.29%
Volume: 0.00
Aug. 7, 2020 11:03p
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/zigman2/quotes/210599339/delayed
XX : STOXX
90.68
-0.45 -0.49%
Volume: 0.00
Aug. 7, 2020 11:03p
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/zigman2/quotes/207242873/delayed
XE : Germany: Xetra
7.73
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Volume: 7.03M
Aug. 7, 2020 6:30p
P/E Ratio
N/A
Dividend Yield
0.00%
Market Cap
€15.90 billion
Rev. per Employee
€417,912
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/zigman2/quotes/203042512/composite
US : U.S.: NYSE
$ 9.22
0.00 0.00%
Volume: 2.51M
Aug. 7, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
0.00%
Market Cap
$18.75 billion
Rev. per Employee
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FR : France: Euronext Paris
13.30
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Aug. 7, 2020 5:35p
P/E Ratio
N/A
Dividend Yield
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Market Cap
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ES : Spain: Madrid
1.83
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Aug. 7, 2020 5:38p
P/E Ratio
N/A
Dividend Yield
4.41%
Market Cap
€30.48 billion
Rev. per Employee
€374,762
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DE : Germany: Frankfurt
4.80
+0.04 +0.73%
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Aug. 7, 2020 8:59p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
N/A
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€166,016
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IT : Italy: Milan
7.73
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P/E Ratio
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0.00%
Market Cap
€17.30 billion
Rev. per Employee
€80,793
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FR : France: Euronext Paris
35.48
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Aug. 7, 2020 5:35p
P/E Ratio
6.40
Dividend Yield
0.00%
Market Cap
€44.27 billion
Rev. per Employee
€456,254
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/zigman2/quotes/201759252/delayed
UK : U.K.: London
2,955.00 p
+38.00 +1.30%
Volume: 409,191
Aug. 7, 2020 4:35p
P/E Ratio
15.96
Dividend Yield
2.54%
Market Cap
£23.19 billion
Rev. per Employee
N/A
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/zigman2/quotes/202550827/composite
US : U.S.: NYSE
$ 38.79
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Volume: 181,768
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P/E Ratio
16.50
Dividend Yield
2.32%
Market Cap
$30.26 billion
Rev. per Employee
$351,172
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/zigman2/quotes/204738740/delayed
UK : U.K.: London
37.05 p
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Volume: 3.48M
Aug. 7, 2020 4:35p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
£613.68 million
Rev. per Employee
N/A
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/zigman2/quotes/205429530/delayed
IE : Ireland: Dublin
11.51
-0.05 -0.43%
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Aug. 7, 2020 4:30p
P/E Ratio
65.40
Dividend Yield
N/A
Market Cap
€12.55 billion
Rev. per Employee
€530,769
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UK : U.K.: London
2,337.00 p
-12.00 -0.51%
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P/E Ratio
17.66
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2.38%
Market Cap
£4.50 billion
Rev. per Employee
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DAX
DX : Xetra Indices
12,674.88
+83.20 +0.66%
Volume: 57,754
Aug. 7, 2020 6:30p
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/zigman2/quotes/210597958/delayed
FR : France: Euronext Paris
4,889.52
+4.39 +0.09%
Volume: 62,365
Aug. 7, 2020 6:05p
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/zigman2/quotes/210598409/delayed
UK : FTSE UK
6,032.18
+5.24 +0.09%
Volume: 525,872
Aug. 7, 2020 4:59p
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/zigman2/quotes/210597995/delayed
XX : Spain: Madrid
6,950.50
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Volume: 184.15M
Aug. 7, 2020 5:38p
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/zigman2/quotes/210561242/realtime/sampled
US : Tullett Prebon
1.1788
+0.0001 +0.0085%
Volume: 0.0000
Aug. 7, 2020 4:59p
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Carla Mozée is a reporter for MarketWatch, based in London. Follow her on Twitter @MWMozee.

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