European Stocks Extend Rally on Receding Greek Exit Fears

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European Stocks Extend Rally on Receding Greek Exit Fears

European stocks rallied bolstered by the prospect of US lending rates remaining lower for a while and a report that Greece was drawing up another plan for economic reforms.

The UK benchmark FTSE 100 Index advanced 0.9% and hit record highs breaking the 7000 point ceiling for the first time in history.

The Stoxx Europe 600 Index inched 0.8% to 404.1 points at the close of trading on Friday having exceeded its 2007 peak. The index is now only 0.4% below its 15-year closing record having topped the estimates of 12 analysts polled by Bloomberg at the beginning of the year.

All sectors of the index inched up on the day led by advances in oil and gas 2.4%, and basic resources stocks, 2.40%. The sectors benefitted by a major slump in the dollar aiding dollar denominated commodities.

The Stoxx has rallied 18% this year on optimism that the ECB’s buyback program would bolster the region’s economy and a weaker euro would help bolster earnings.

“This year’s rally in Europe is the start of something rather than the end of it,” Ben Kumar, who helps oversee about $12 billion at Seven Investment Management in London, told Bloomberg.

“There might be a few wobbles on the way. People still tend to look for the negatives in Europe, which is why they may have underestimated the extent of the gains. With what the ECB is doing, and some relief that the Fed is in no rush to raise rates, stocks are the natural home for investors right now.”

Global investors are betting on the weaker euro to boost the Euro zone’s economy and corporate earnings.  The Federal Reserve on Wednesday gave its strongest indication yet that it would wait to raise its interest rates until after there is a marked improvement in the economy.

“Now that investors are reassured about the pace at which the Fed will normalize its monetary policy, this year’s positive trend on the market is set to continue. We will see further investment flows coming into Europe,” Barclays France director Franklin Pichard told Reuters.

To contact the reporter of the story: Jonathan Millet at john@forexminute.com