By Sara Sjolin, MarketWatch
LONDON (MarketWatch) -- European stock markets rallied on
Thursday, boosted by upbeat Chinese manufacturing data and solid
moves for banks after well-received earnings reports.
Stocks held on to gains after both the European Central Bank and
the Bank of England kept interest rates on hold.
The Stoxx Europe 600 index traded 1% higher at 302.71, after
closing out July with the biggest monthly gain since October 2011
on Wednesday.
Banks posted some of the biggest gains in the index, with
Société Générale SA climbing 11% after saying profit more than
doubled in the second quarter and confirming its outlook for the
next two years.
Shares of Lloyds Banking Group PLC (LYG) rallied 7.8% after the
bank said it swung to a profit in the first half of the year from a
loss in the same period last year.
Shares of Danske Bank AS jumped 6.4% after the Danish firm
posted a bigger-than-expected rise in second-quarter net
profit.
Additionally, Banco Popular Español SA rose 5.1% in Madrid,
Credit Agricole SA gained 4.3% in Paris and Commerzbank AG picked
up 4.4% in Frankfurt.
On a more downbeat note, Royal Dutch Shell PLC (RDSB) slid 4.1%
after the oil giant posted a 60% drop in profit for the second
quarter, largely due to a write-down on its shale assets in North
America.
Central banks in focus
More broadly, the pan-European index kicked off the day in
upbeat fashion as investors cheered the decision late Wednesday
from the U.S. Fed to leave its asset purchases unchanged at $85
billion a month. The central bank said in a statement that the
economy is expanding at a "modest" pace, a change from the
"moderate" pace seen in June, with many analysts interpreting the
changes as mainly dovish.
Central banks in Europe were also in the spotlight on Thursday
after the European Central Bank left its key lending rate at 0.5%
as expected. ECB boss Mario Draghi said at the following news
conference that the decision was unanimous and that data
"tentatively confirm" stabilization of economic activity at "low
levels." Read: Live blog of ECB President Mario Draghi's news
conference
In the U.K., the Bank of England also left monetary policy
unchanged, with the key lending rate remaining at a record low of
0.5%, where it has stood since March 2009. The bank's asset
purchases was maintained at 375 billion pounds ($570 billion).
U.K. stocks trimmed gains after the decision, but the FTSE 100
index recovered to trade 0.8% higher at 6,672.14.
Among other country-specific indexes. Germany's DAX 30 index
picked up 1.5% to 8,400.83, while France's CAC 40 index rose 1.1%
to 4,037.77.
Upbeat China data
The markets were further buoyed by the official China Purchasing
Managers' Index (PMI), registering a surprise gain for July, rising
to 50.3 from 50.1 the previous month. A reading above 50 indicates
expansion.
A separate PMI reading by HSBC and Markit released 45 minutes
later differed, however, saying Chinese manufacturing activity was
contracting, with the index dropping to an 11-month low.
But resource firms, which tend to rise on positive growth
indications from China, seemed to focus on the upbeat official
reading. Shares of Rio Tinto PLC (RIO) climbed 2.2% and BHP
Billiton PLC (BHP) rose 1.9%. Metals prices were mostly higher.
Other data releases further contributed to the rally, including
the euro-zone's manufacturing PMI rising to a two-year high and
better-than-expected U.S. jobless claims data.
Movers
Among notable movers in Europe, German retailer Metro AG rallied
9.6% after swinging to a second-quarter profit of EUR33 million
after a loss of EUR18 million a year earlier.
On more downbeat note, BMW AG slipped 0.9% after the car maker
said second-quarter earnings before interest and taxes decreased
8.8%.
Shares of ArcelorMittal SA shaved off 3.8% in Paris after the
steelmaker revised its full-year earnings guidance lower and posted
a fourth consecutive quarterly net loss due to lower steel prices
and restructuring charges.
Shares of Sanofi SA (SNY) slid 4.1% after the drug maker lowered
its earnings guidance for 2013 and reported a plunge in
second-quarter profit.
Outside the major indexes, shares of Neste Oil Oyj surged 21%
after the Finnish oil-refining firm reported second-quarter profit
of 90 million euro ($119 million) from a loss of EUR112 million in
the same period last year.
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