European shares at record high as Fed unveils taper plan; BoE eyed

[November 04, 2021]  By Anisha Sircar

(Reuters) - European shares rose for a fifth straight session on Thursday, hitting record levels, as the U.S. Federal Reserve signalled it was in no hurry to raise interest rates, shifting the focus to the Bank of England's policy decision later in the day.

 The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, November 3, 2021. REUTERS/Staff

The pan-European STOXX 600 jumped 0.5%, after the Fed, as expected, said it would begin scaling back its monthly bond purchases in November with plans to end them next year. The U.S. central bank said it would wait for better jobs growth to raise rates, sticking to its transitory inflation stance.

"What we've heard from the Fed is that next year central banks are going to be easing off the accelerator, but they won't be hitting the brakes," said Hugh Gimber, global market strategist at JP Morgan Asset Management.

"That monetary policy is going to remain accommodative for some time to come is good news for stocks."

The European Central Bank also signalled on Wednesday that it was in no hurry to tighten policy. The Bank of England's decision is due at 1200 GMT.

Although investors are expecting interest rates to be hiked to 0.25% from 0.1%, economists are doubtful about such a move, given the economic impact from recent COVID-19 surges.

The FTSE 100 was up 0.4% ahead of the meeting.

The STOXX 600 has hit a series of all-time highs in November, driven by a relatively strong earnings season despite rising cost pressures.

The euro zone's volatility gauge fell further to its lowest since mid-June.

Gains on the STOXX 600 were led by a 1.5% rise in oil and gas stocks, after crude prices pared losses ahead of a meeting of the Organization of the Petroleum Exporting Countries and its allies. [O/R]

Among stocks, drugmaker Roche was the biggest boost to the STOXX 600 after it bought back its nearly one-third voting stake from rival Novartis for $20.7 billion. Novartis was up 2.4%.

Real estate stocks jumped, led by a 17% rise in Alstria Office following its announcement of a takeover bid from Canada-based Brookfield Asset Management.

Germany's blue-chip index DAX rose 0.4%, hitting a record high, after strong earnings from Deutsche Post led to a 2.7% rise in its stock.

France's Societe Generale and Germany's Commerzbank advanced 3.9% and 5.7%, respectively, after the banks posted upbeat quarterly earnings.

(Reporting by Anisha Sircar in Bengaluru; Editing by Shounak Dasgupta)

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