By Barbara Kollmeyer, MarketWatch
MADRID (MarketWatch) -- European stocks ended mostly higher on
Thursday as the European Central Bank lowered interest rates.
The Stoxx Europe 600 index rose 0.3% to 297.88.
Most European markets were closed Wednesday for the May Day
holiday.
European stocks saw little initial reaction to news the ECB cut
its benchmark rate by 25 basis points to 0.5%.
Stocks rose after upbeat U.S. data, but then dropped as ECB
President Mario Draghi began speaking at a news conference. Stocks
recovered some ground in step with U.S. market gains.
Speaking to reporters, Draghi said the ECB's policy would remain
accommodative, and it stands ready to act. He said weak economic
data extended into spring and labor-market conditions remain
sluggish.
Stephen Pope, managing partner at Spotlight Ideas, said some
investors were disappointed that the ECB hasn't done anything to
"generate an expansionary monetary base."
"Rates should have been reduced far earlier and today, we should
be looking at 25 basis points as the rate, not 50 basis points.
Monetary growth, i.e. an explicit reflation of the balance sheet
should be sanctioned," said Pope, but he said the German Bundesbank
would likely block that.
"The reality is that the engine of reform has been starved of
fuel. Industry and hence shares are fearful that there will be
limited to no supply-side reform," Pope said.
The ECB also cut the interest rate on the marginal lending
facility by 50 basis points to 1.00%, but analysts said this would
merely encourage banks to lend and not impact the real economy.
"All things considered, the one thing to take from this is that
the ECB has done nothing that is going to improve circumstances in
the short term," said Craig Erlam, market analyst at Alpari
U.K.
Data ahead of the ECB meeting showed euro-zone manufacturing
activity contracted at a slower-than-forecast pace in April, with
the manufacturing PMI falling slightly to 46.7 from 46.8 in March,
according to Markit. German output contracted for the first time in
2013.
Analysts at Credit Suisse wrote in a note that any rate cut
would largely not affect European banks, "in part because we do not
see it as sufficient to have an impact on the current negative
macro background." However, they predicted that Spanish and Italian
banks would be most negatively hit by a rate cut, seeing up to 6%
of 2014 earnings potentially at risk.
Shares of Banco Santander SA fell 0.2% in Madrid, dragging
Spain's IBEX 35 index south by 0.2% to 8,406.40. Italy's FTSE MIB
index fell 0.1% to 16,748.28, with UniCredit SpA dropping 0.3%.
The Credit Suisse analysts said they remain cautious on
peripheral banks, but retain a market perform rating on
higher-quality names that offer superior cash flow potential,
including HSBC PLC (HBC), BNP Paribas SA , Société Générale SA and
Julius Baer Gruppe AG
In Oslo trade, Statoil SA shares fell nearly 4% after the
Norwegian oil and gas company said first-quarter profit sank 58%,
missing forecasts, as production volumes and prices fell.
France's CAC 40 index finished up 0.1% at 3,858.76. Capgemini
shares rose nearly 8% after the computer services company said it
was backing its 2013 outlook despite the "difficult economic
climate." But heavyweight oil major Total SA (TOT) dropped 1%.
The German DAX 30 index rose 0.6% to 7,961.71, with heavyweight
bank Commerzbank AG up 4.1%.
Shares of Infineon Technologies AG surged nearly 10% after the
semiconductor maker said it expects higher revenues and margins for
2013, due to market growth and recovering demand for autos.
The U.K.'s FTSE 100 index gained 0.2% to 6,460.71.
Shares of BG Group PLC rose 4.3% after the oil and natural gas
company reported a 0.8% fall in net profit for the first quarter,
but said it was on track to meet project milestones for this
year.
But there were plenty of stocks in the red, such as Shire PLC
(SHPGY), which reported a 56% drop in operating income, reiterated
its earnings guidance for the full year and said it's altering its
business structure. The firm's shares sank nearly 7%.
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