Europe higher on Fed relief, ECB announcement; Bayer shares up

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European shares were higher in morning trade on Thursday after an important announcement regarding the meetings of the European Central Bank (ECB) and investors showing relief over the U.S. Federal Reserve‘s accommodative policy stance.

Symbol Name Price   Change %Change Volume
FTSE FTSE 100 Index 6807.75   26.85 0.40% 164850096
DAX DAX Index 9753.91   92.41 0.96% 25120210
CAC 40 CAC 40 Index 4462.20   30.79 0.69% 32130828
IBEX 35 IBEX 35 Idx 11002.80   95.40 0.87% 69771683

ECB rotates

The pan-European Euro Stoxx 600 index shot higher in mid-morning trade on Thursday after the ECB said that members of its Governing Council would used on a rotation system. Crucially this means that Jens Weidmann, governor of the German Bundesbank and traditionally against aggressive stimulus measures, will sit out the meetings in May and October next year.

Traders from IG Markets told CNBC that this raised the possibility that a quantitative easing (QE) program could be announced in May next year, in his absence, and markets surged higher on the news.

Markets had already started on a positive footing after Fed chair Janet Yellen’s decision to stick to language that said interest rates would rise “a considerable time” after the monthly bond-buying program ended. In the U.S. this sent the Dow to a record high overnight. Most noticeably, the Fed also projected a faster pace of rate hikes. For the end of 2015, the median forecast was 1.375 percent versus 1.125 percent in June.

“Language around economic activity was practically identical to the July statement. Janet Yellen’s key phrase of ‘improved somewhat further’ was used to explain that labor conditions remain, as does her concern that there is still significant slack in unemployment,” Evan Lucas a market strategist at IG Markets said in a morning note.

China housing data

In Asia, shares were mixed with slowing property prices in China offsetting the good news from the Fed. Chinese new home prices rose just 0.5 percent on year in August, compared with July’s 2.5 percent rise, according to the National Bureau of Statistics. On a monthly basis, prices posted their fourth consecutive decline, exacerbating worries about a correction in the real-estate market on the back of declining sales and a glut of supply.

In Europe, all eyes will be on Scotland as voting takes place on Thursday for the country’s independence referendum. Polls show the vote will be close but bookmakers are predicting that the “No” campaign will be victorious. There are no exit polls. The result is expected to be known Friday morning before European stock markets open.

<p>Fed remains set for a rate hike by mid-2015: UBS</p> <p>Despite &quot;some hawkish signals&quot; from Thursday&#039;s policy statement, the Fed is still most likely to raise interest rates in mid-2015, says Alvin Liew, Senior Economist at UOB.</p>

Bayer shares surge

On the data front, August retail sales for the U.K. are due to be released at 9:30 a.m. London time. The Swiss National Bank stuck to its minimum exchange rate target of 1.20 francs per euro.

In stocks news, the chemicals sector was the major gainer with Bayer rising to the top of benchmarks. The German firm said on Thursday that it was planning to float its plastics unit as a separate company, which led to its shares to climb 5 percent.

Food wholesaler Booker Group rose 4.5 percent after the London-listed company announced a rise in second-quarter sales.

Merger talk in the industrials sector led Sulzer shares higher by 9 percent. The Swiss company confirmed that it was in discussions with Dresser-Rand regarding a potential transaction.

Meanwhile, easyJet shares also climbed, by 1.5 percent after upping its dividend on Thursday and announcing plans to expand its fleet.

 

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