Europe Markets

Europe ends sharply higher; banks rally; DAX jumps 3.5%; oil rises

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European equities finished sharply higher on Friday as investors cheered a rally in oil prices and digested the aggressive easing measures the European Central Bank (ECB) announced on Thursday.

Draghi delivers?

European markets

The pan-European Stoxx 600 index ended Friday up some 2.6 percent provisionally with all sectors closing in positive territory. Despite Friday's sharp gains, the STOXX 600 only rose 0.1 percent on the week.

London's FTSE rose 1.7 percent at Europe's close, while its counterparts soared ahead. France's CAC jumped 3.3 percent while Germany's DAX finished some 3.5 percent higher.

Sentiment in Europe recovered on Friday after closing sharply lower in the previous session, on the back of an oil price fall and mixed messages from ECB President Mario Draghi.

Thursday's monetary policy meeting saw the ECB launch an expanded package of measures to kick-start Europe's economy. However, Draghi added in the following press conference that he did not anticipate the need to reduce rates further.

Delayed reaction

On Friday, however, bourses bounced back with a delayed reaction to the extra easing by the ECB. Italian banks were by far some of the biggest gainers in the financial sector, with Unicredit and Intesa Sanpaolo showing increases of 9.5 and 7.5 percent, respectively.

Other top performers in the sector included Spain's Banco Popular and Banco de Sabadell, finishing in excess of 12.5 and 9 percent higher respectively, and Societe Generale up some 5.7 percent.

Meanwhile, Deutsche Bank issued a statement warning that volatile financial markets in the first quarter, normally a strong season for banks, might pose a challenge for the entire sector. Nevertheless the bank's shares were higher by Friday's close, up 7.4 percent buoyed by the rest of the banking sector.

The overall sector led Europe's markets higher into positive territory, ending up 4.9 percent as a whole.

Oil in focus

Mario Draghi, President of the European Central Bank
Oil slump teaches Draghi a tough lesson

Oil prices bounced back on Friday, following an optimistic report from the International Energy Agency (IEA) on Friday, which said that prices could have bottomed out.

"For prices there may be light at the end of what has been a long, dark tunnel, but we cannot be precisely sure when in 2017 the oil market will achieve the much-desired balance," the IEA cautioned.

Prices responded positively to the news, with U.S. crude almost 2 percent higher, trading around $38.65, while Brent hovered around $40.50 at the close. Oil stocks also saw sharp gains, with Seadrill, Total and Sbm Offshore all posting gains of more than 2.5 percent.

Several metal prices also recovered on Friday, which gave a boost to the sector, with ArcelorMittal jumping near the top of Europe's benchmarks, closing up over 11 percent. BHP Billiton and Anglo American also finished sharply higher.

UK trade data

U.K. pub chain JD Wetherspoon reported a 3.9 percent drop in first-half pre-tax profits to £36 million. Its shares however finished in positive territory.

In individual stock news, U.K.-South African financial services group Old Mutual announced Friday that it would split into four main units. Its London-listed shares slipped 1.8 percent in trade.

On the data front, Germany's February inflation figures were confirmed at 0.4 percent from the month before, and -0.2 percent from the same period last year. U.K. data showed that the country's trade deficit with the rest of the world narrowed to £3.459 billion in January from a revised £3.699 billion in December.

In other news, the Department of Justice has criticized Apples 'corrosive' defense of iPhone locking while the tech titan says the DOJ has 'thrown decorum to the wind' as the war of words heated up in the encryption battle.

In markets overseas, Asia finished higher as it digested the latest news from Europe's central bank, while the U.S. posted strong gains at Europe's close, following a jump in oil prices.

Willem Buiter
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