May 8, 2014 / 4:45 PM / 4 years ago

European shares hit near 6-year high as ECB hints at June action

* FTSEurofirst 300 up 1.1 pct, hits highest since June 2008

* Peripheral banks rally as ECB opens door to June move

* Metro and ProSieben rise after updates

By Francesco Canepa

LONDON, May 8 (Reuters) - A major European equity index surged to near six-year highs on Thursday, led by Italian and Spanish banks, after the European Central Bank opened the door to more stimulus measures in June.

The pan-European FTSEurofirst 300 index hit its highest level since June 2008 on speculation the ECB may cut interest rates next month, paving the way for further steps such as an asset-purchase programme.

Italian banks, which own large amounts of their government’s debt, rallied 4.1 percent on the prospect of lower borrowing costs if the ECB cuts rates or starts buying sovereign or corporate bonds.

The ECB, which is trying to counter the risk of excessively low inflation, kept its key rate on hold on Thursday. But president Mario Draghi said it “was comfortable” with the idea of acting in June, after the bank’s staff forecasts are published.

“These markets are rallying on the idea that ... he’s ready to act. Having been quite silent, he has now shown his cards,” Alan Higgins, chief investment officer at Coutts, said. “First a rate cut, which should be very modest, then some kind of QE. The fact that they’re looking at it is enough to get the market very excited.”

An asset-purchase programme would lower borrowing costs where they are still elevated, such as in southern Europe. That would help companies struggling with high debt and meagre profits, such as Italian and Spanish banks or telecoms group Telecom Italia, which rose 1.1 percent.

The FTSEurofirst 300 closed 1.1 percent higher at 1,358.91 points, having hit an intra-day high of 1,359.07 points following Draghi’s comments.

The euro zone’s blue-chip Euro STOXX 50 index rose 1.4 percent to 3,204.30 points, recording its biggest one-day rise since April 16.


Some reassuring updates from companies such as the German supermarket chain Metro helped underpin stocks in what has been a lacklustre reporting season so far.

Metro AG rallied 2.7 percent as better-than-expected profits at its cash and carry business offset a weaker contribution from the Media-Saturn division.

German media group ProSiebenSat.1 rose 5.9 percent after posting a 9.5 percent increase in first-quarter core earnings.

According to Thomson Reuters StarMine, 50 percent of the companies on the STOXX Europe 600 index that have reported quarterly earnings through May 7 have missed estimates, the highest proportion since the second quarter of 2011.

Also helping market sentiment, data on Thursday showed that China’s exports and imports returned to slight growth in April, after a weaker-than-expected start to 2014 in the world’s second-biggest economy.

Europe bourses in 2014:

Asset performance in 2014:

Today’s European research round-up (Additional reporting by Sudip Kar-Gupta; Editing by Larry King/Ruth Pitchford)

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