By Sara Sjolin, MarketWatch
LONDON (MarketWatch) -- European stock indexes moved sharply
higher on Thursday as markets interpreted the U.S. Federal
Reserve's decision to taper as showing confidence in the underlying
strength of the U.S. economy.
The Stoxx Europe 600 index jumped 1.7% to close at 319.44,
posting the biggest percentage gain since early September.
Germany's DAX 30 index rallied 1.7% to 9,335.74. France's CAC 40
index added 1.6% to 4,177.03, and the U.K.'s FTSE 100 index rose
1.4% to 6,584.70.
The solid gains came after the U.S. Federal Open Market
Committee late Wednesday pulled the tapering trigger and voted to
reduce the central bank's monthly bond buying to $75 billion from
$85 billion, signaling greater confidence that the U.S. economy
will grow faster and hiring will pick up. Chairman Ben Bernanke
said, "We are hopeful the economy will continue to show progress,"
with a return to a more normal path of growth.
The U.S. central bank also tried to cushion the effects of
smaller asset purchases, indicating that short-term interest rates
could remain near zero for even longer than the Fed had previously
suggested.
"The Fed made the right call to start tapering, removing much of
the uncertainty in the market of the timeline in which it will
consider taking action. This should in turn remove much of the
volatility that we have seen in the final quarter of 2013, gearing
us up for a delayed but eagerly anticipated 'Santa Rally' to finish
this year [with] a bang and kick off the next year in an upbeat
fashion," said Ishaq Siddiqi, market strategist at ETX Capital.
U.S. stocks rallied on Wednesday, but fell on Thursday after
some disappointing economic data. Of interest in Europe, European
Union finance ministers late Wednesday agreed on a new bank-bailout
system in hopes that it will it stop banking crises from hitting
the finances of entire countries. The deal ends a standoff between
Berlin and other European capital over the design of the so-called
Single Resolution Mechanism.
Among notable movers in Europe, shares of AstraZeneca PLC (AZN)
added 1.1% after news it will buy Bristol-Myers Squibb Co.'s (BMY)
entire stake in the two companies' diabetes venture for up to $4.1
billion. Bristol-Myers Squibb shares climbed 3.1%.
Bayer AG added 1.1% after the German chemicals and
pharmaceutical firm offered 17.6 billion Norwegian kroner ($2.87
billion) for peer Algeta ASA , an advance on a preliminary bid.
Banks were also on the rise, with shares of BBVA SA (BBVA) 2.9%
higher in Madrid, Barclays PLC (BCS) up 2.1% in London, and
Commerzbank AG climbing 1.6% in Frankfurt.
Outside the major indexes, shares of Saab AB surged 32% after
the Swedish aerospace and defense company won a $4.5 billion
contract to supply 36 fighter jets to Brazil.
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