Reuters/London
European stock markets rose yesterday after the European Central Bank’s decision to buy government bonds, with Greek shares leading the gains before the country’s election tomorrow.
European shares posted their biggest weekly gain in more than three years as investors cheered the quantitative easing programme the ECB announced on Thursday.
The bond-buying plan helped Greece’s ATG share index rise 6.1%. Attica Bank, National Bank of Greece and Piraeus Bank gained 14% to 8%.
The anti-bailout party Syriza is leading in opinion polls before Greece’s election on Sunday. But traders are starting to see a greater chance that Syriza will reach a compromise with Greece’s official lenders if it gains power.
Alexis Tsipras, Syriza’s leader, said he was “certain” that Greece would be able to negotiate a “mutually acceptable solution” by July, when Greece will be eligible for the ECB bond-buying programme.
“The ECB have thrown a carrot to Syriza, saying that if you complete the review and agree with the troika (of international lenders), we will buy Greek bonds,” said Athanasios Vamvakidis, head of G10 forex strategy at Bank of America Merrill Lynch.
“This increases the incentives for a Syriza-led government to compromise, and is market-positive.”
The FTSEurofirst 300 index of top European shares closed up 1.8% at 1,479.51 points, a seven-year high. The index rose 5.1% this week, posting its strongest week since December 2011.
Cyclical stocks such as carmakers, which are expected to benefit from a lower euro, featured among the biggest gainers. BMW rose 4.9% to hit a record high and PSA Peugeot Citroen gained 2%.
The prospect of quantitative easing by the ECB knocked the euro to a low of $1.1113 yesterday from $1.40 in May, potentially boosting European corporate earnings. Strategists say a 10% fall by the euro translates into a 6 to 8% rise in earnings for the region’s companies.
“It will be a major boost to exports and will lift confidence among company executives. Industrials will be among the top winners,” said Alexandre Baradez, chief market analyst at IG France.
Adidas rose 3.9% after reporting better-than-expected sales.
In the STOXX 600, six companies have reported fourth-quarter earnings, with 67% exceeding analyst estimates. In a typical quarter, 48% of STOXX 600 companies beat EPS estimates, according to Thomson Reuters I/B/E/S data.
BMW rose 4.9% to hit a record high yesterday after the European Central Bank’s decision to buy government bonds.
