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Aug 4, 2016

European Markets at Close Report, by CNBC on August 4, 2016: Stocks Edge Up as BOE Key Rate; Sterling Dives 1.5%

Arjun Kharpal, Alexandra Gibbs

European stocks traded in positive territory on Thursday as investors digested the latest news out of the Bank of England (BoE), which cut the U.K.'s key interest rate to a record low of 0.25 percent.
The pan-European STOXX 600 came off session highs, up 0.65 percent with sectors trading mostly higher.

The U.K.'s FTSE 100 pushed ahead after the BoE's latest policy move, up 1.6 percent, while the domestically-focused FTSE 250 index jumped 1.45 percent. Meanwhile, France's CAC 40 and Germany's DAX ticked higher, up 0.4 and 0.6 percent respectively.

BoE cuts rates, sterling tumbles

FTSE FTSE 6737.98 103.58 1.56% 624918573
DAX DAX 10214.99 44.78 0.44% 57373744
CAC CAC 4342.18 21.10 0.49% 62122807
IBEX 35 IBEX 35 Idx 8393.40 129.90 1.57% 148385352

The BoE cut rates for the first time since 2009 on Thursday by 25 basis points, slashed growth forecasts and said it would expand its program of government bond purchases, known as quantitative easing, to help prop up the British economy.
"Some of the adjustments to this new reality may prove difficult and many will take time, but the U.K. can handle change and it has one of the most flexible economies in the world," said Mark Carney, governor of the central bank at a press conference.
"We cannot immediately or fully offset the economic impacts of a large structural shock, however monetary policy can support the necessary adjustments of the U.K. economy during a period of heightened uncertainty, and that's why at its meeting yesterday the MPC agreed an exceptional package of measures," Carney said, adding that by acting early, the bank can reduce uncertainty, bolster confidence and support the necessary adjustments in the U.K. economy.
The looser monetary policy in the U.K. and other areas of the world is supporting stocks, with U.S. markets opening higher on the back of the news. Meanwhile, sterling slumped on the back of the announcement, off 1.5 percent against the U.S. dollar, at $1.3136 at 2.30 p.m. London time.
Despite the further easing measures in the pipeline, some have questioned whether it will make a difference.
"The uncertainty created by the Brexit referendum result cannot be addressed by small changes in interest rates or other monetary measures," Andrew Sentance, senior economic adviser at PwC, said in a note after the decision.
"It requires a political response from the government, to make clear the nature of our future relationship with the EU - which will inevitably take time. There are some circumstances when a central bank can do little to offset the shock to the economy and the resulting uncertainty, and that is the case now."

Earnings: Siemens jumps; Aviva pops 7.5%

Aside from the major central bank news, earnings were also a key market mover during Thursday's session. German engineering firm Siemens rallied over 5 percent after it reported better than expected results for the third quarter on Thursday and raised its guidance for 2016 as a whole.
Meanwhile in the insurance space, Aviva posted a 13 rise in first-half operating profit, helped by a boost in its life insurance unit, sending shares to the top of teh STOXX 600, up 7.5 percent. Germany's Hannover Re meanwhile posted a sharp fall in second-quarter net profit, but reaffirmed its goals for 2016, sending shares to the bottom of Europe's benchmarks.
And RSA Insurance Group said group operating profit was up 20 percent in the first half of the year, helping push shares above 1.5 percent.

The Olympics start on Friday: Which central banker should win gold?

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Shares of network equipment maker Nokia fell after it reported earnings before interest and taxes (EBIT) of 332 million euros ($370 million) in the second quarter, missing analyst forecasts of 400 million, while sales fell 11 percent year-on-year.
Precious metals miner Randgold Resources posted a fall in production in the second-quarter, sending shares nearly 11 percent lower, which weighed on the basic resources sector along with Fresnillo. Shares have since pared, down over 4 percent, as spot gold prices spiked following the BoE decision.
Shares of Rheinmetall were up nearly 5 percent after it reported a sharp rise in first-half sales which helped to pull up the overall auto sector.