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Europe: ECB, Spain boost Stoxx as earnings trigger sharp moves

[LONDON] European shares rose from four-week lows on Thursday, boosted by the European Central Bank's decision to keep stimulus taps open and hopes of a breakthrough in the Catalan crisis, while third-quarter earnings triggered sharp moves in individual stocks.

The pan-European Stoxx 600 benchmark index rose 1.1 per cent to 391.45 points with heavy gains across most sectors and trading centres, particularly in Germany where the DAX touched an all time closing high with a 1.4 per cent rise.

The euro's tumble provided European stocks with their biggest gains in over six weeks, as the ECB's Mario Draghi said the bank would extend asset purchases until at least September 2018 at a reduced pace.

"Anything that suggests the euro isn't going up in a straight line is potentially good news for European equities," Michael Metcalfe, head of global macro strategy at State Street, told Reuters.

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Sandrine Perret, European Strategist at Credit Suisse, said the move was likely to continue to fuel the bull market.

"The decision should lead to further strength for European equities," she wrote in a note, adding that strong economic growth should bolster corporate earnings.

Spain's IBEX closed up 1.9 per cent as hopes of a breakthrough in the Catalan crisis fuelled optimism among investors.

While shares in retailer DIA slumped 4.8 per cent to a five-year low after it issued a profit warning, most Spanish blue-chips posted substantial gains, notably heavyweight banks such as Banco Sabadell or Banco Santander , both up 3.2 per cent.

While stocks markets have seen very little volatility recently, the latest earnings season has triggered some outsized moves.

Nokia was the biggest faller on the Stoxx, losing a spectacular 17.5 per cent after the Finnish firm reported weaker-than-expected quarterly earnings.

"Difficult to say at this stage how much lower consensus could go given all the negative wording on 2018," Morgan Stanley analysts said in a note.

Barclays tumbled 7.4 per cent in its biggest one-day fall since the Brexit vote in June 2016. The British bank posted worse than expected profit before tax due to a weak trading performance by its investment bank.

Deutsche Bank also reported a drop in investment bank revenue, although cost cuts lifted profit above analysts'expectations. Its shares closed 0.9 per cent lower.

Also in the banking sector, Nordea, the Nordic region biggest bank, sank 5.9 per cent after saying it would miss its 2018 cost target and cut at least 6,000 jobs.

Heavy losses were offset by swings in positive territory like Franco-Italian chipmaker STMicroelectronics which ended the day up 12 per cent after raising its year-end outlook.

Other winners of the day included Finnish petroleum producer's Neste, up 9 per cent after its third-quarter results came in above expectations.

According to Thomson Reuters data, third-quarter earning growth expectations for the Stoxx 600 have declined to 3.4 per cent from around 10 per cent expected in July.

A country breakdown shows that earnings of UK companies in the pan-European index are expected to rise 11.2 per cent in the third quarter, compared to a fall of 11.8 per cent seen for France and a 0.6 per cent drop expected for Germany.

Italy's earnings growth is seen at 35 per cent.

REUTERS