By Sara Sjolin, MarketWatch
LONDON (MarketWatch) -- European stock markets rallied on
Monday, rebounding after a selloff at the end of last week, as the
prospect for continued low rates in Europe and a stronger U.S.
economy overshadowed fears of less stimulus from the Federal
Reserve.
Investors awaited U.S. bellwether Alcoa Inc. (AA) to kick off
the earnings season later in the day.
The Stoxx Europe 600 index rose 1.4% to close at 292.37, after
falling 1.3% on Friday.
Among major movers, shares of Hikma Pharmaceuticals PLC jumped
5.6% in London after the drug maker said it now expects revenue
growth around 17% in 2013, up from the 13% previously expected.
Banks were also among major advancers, with shares of Banco
Comercial Português SA rising 6.9%, Royal Bank of Scotland Group
PLC (RBS) up 4.4% and Société Générale SA 2.5% higher.
The broader stock market regained most of the territory it lost
on Friday, when a stronger-than-expected jobs report in the U.S.
sent stocks lower in Europe on fears of less stimulus from the
Federal Reserve.
Fed Chairman Ben Bernanke has said the central bank could start
scaling back its $85-billion-a-month asset-purchase program if data
such as new jobs shows the economy is growing as expected. That has
left investors worried that less liquidity in the financial system
will create market turmoil.
U.S. stocks were initially also weighed by the data, but closed
firmly higher on Friday as optimism over an improving U.S. economy
overshadowed the prospects of a reduction in the Fed's easing
program.
Michael Hewson, senior market analyst at CMC Markets in London,
said that European investors on Monday also were convinced that the
upbeat jobs report is a positive factor for the equity market.
"I think we can say that markets are coming around to the idea
that Fed tapering is not just a bad thing. It comes with an
improvement in economic data and monetary policy will remain
accommodative," he said.
"But I think we'll continue to see markets trade in a choppy
range until we get some kind of idea when the Fed is going to
taper. That's really what the markets want to know. The estimates
range from September to [first quarter] 2014 and that nervousness
will make markets extremely choppy. You have to be brave to say
markets will see new highs and it will also depend on the earnings
season," he added.
The International Monetary Fund's managing director, Christine
Lagarde, warned on Sunday that central banks must be careful when
they exit expansive monetary policy, according to The Wall Street
Journal. Read: IMF takes another swipe at U.S. budget cuts
U.S. stocks rose on Monday, after light trade on Friday on the
back of the Fourth of July holiday on Thursday.
After the closing bell on Monday, aluminum giant Alcoa reports
quarterly results, signaling the unofficial start of the
second-quarter earnings season.
"This certainly has the potential to provide some pace for
markets as a whole with investors looking increasingly anxiously at
how balance sheets are stacked up, as the era of very cheap money
threatens to come to a close," said Mike McCudden, head of
derivatives at Interactive Investor, in a note.
Greek rally
In Greece, the Athex Composite index rose 2.1% to 858.40. The
country's "troika" of international lenders -- the European
Commission, the European Central Bank and the International
Monetary Fund -- reached a staff-level agreement with the Greek
authorities on new economic and financial policies needed to ensure
the bailout program remains on track. Euro-zone finance ministers
met in the afternoon to discuss Greece's next tranche of bailout
money. Read: Greeks march in protest against bailout job cuts
Meanwhile, European Central Bank President Mario Draghi
reiterated his message from last week that interest rates will
remain low or go even lower for an extended period of time,
according to media reports.
Germany's DAX 30 index gained 2.1% to 7,968.54, even as data
showed exports slumped in May.
Shares of BMW AG gained 2.6% after the car maker said group
sales rose by 6% in the first half of the year, while June sales
reached an all-time high.
Other car makers tracked BMW higher, with shares of Volkswagen
AG up 1.5% and Daimler AG up 2%.
France's CAC 40 index added 1.9% to 3,823.83. Shares of Total SA
rose 2.3% after a French court acquitted the oil giant and its
chief executive Christophe de Margerie of corruption in the Iraq
oil-for-food case.
The U.K.'s FTSE 100 index gained 1.2% to 6,450.07. BP PLC (BP)
climbed 1.4%, as a federal appeals court was set to hear the
company's case that the 2012 settlement in the Deepwater Horizon
oil spill has been misinterpreted by administrators.
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