Europe: Shares rise as euro falls, investors weigh Fed talk

[FRANKFURT] European stocks jumped the most in six weeks as the euro slid and investors assessed the implications of a possible Federal Reserve interest rate increase as early as June.

The Stoxx 600 added 2.3 per cent to 344.49 at 4:30 pm in London. All industry groups climbed, with insurers leading. The euro has dropped close to a two-month low against the dollar amid an increasing probability of higher borrowing costs in the US this year, favouring European companies that export overseas.

The region's firms generate about half their sales abroad, more than the US and Japan, according to Morgan Stanley.

Federal Reserve Bank of Philadelphia president Patrick Harker said late yesterday that he could see two to three rate increases in 2016 and that if the US economy shows sufficient strength, a June raise would be appropriate.

San Francisco Fed president John Williams earlier said two to three hikes this year are "about right."

"A rise in the dollar would be a big help for European stocks," said Heinz-Gerd Sonnenschein, a strategist at Deutsche Postbank AG in Bonn, Germany.

"People are testing whether the market has found a bottom, and there's plenty of money sitting on the sidelines. Maybe investors are finally ready to get back in. I wouldn't say we're in a bullish market, but we've had pretty calm, sideways trading this month even with another Fed rate hike looking more likely."

Fed chair Janet Yellen is due to deliver remarks on Friday. Fed funds futures are now indicating for the first time since March a better-than-even chance that the US central bank will raise interest rates by its July meeting.

A European stock rally from a February low has stumbled since reaching a three-month high in April amid concerns about global-growth prospects, mixed earnings reports and the efficacy of central-bank policies.

The Stoxx 600 is down 1.8 per cent from its recent peak. Among stocks moving on corporate news today, Kingfisher Plc rose 3.6 per cent after it reported better-than-expected quarterly sales at its businesses in the UK and France.

SEB SA rallied 11 per cent after agreeing to buy German silverware and coffee-machine maker WMF for about 1.6 billion euros (S$2.5 billion).

Galenica AG dropped 6.8 per cent after the owner of Switzerland's biggest pharmacy network said it will split into separate companies by the end of 2017. In March, the company had said the division would probably occur this year. Evonik Industries AG slid 3.7 per cent after a shareholder began selling a 4.8 per cent stake in the chemical company.

BLOOMBERG