Last updated Monday, September 26, 2016 10:00 pm GMT+8

Thursday September 22, 2016
04:16 PM GMT+8

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LONDON, Sept 22 — European shares climbed to a two-week high today, boosted by a rally in mining equities, after the US Federal Reserve left interest rates unchanged and projected a less aggressive path for hikes next year and in 2018.

The Fed, however, signaled it could still tighten monetary policy by the end of this year as the labour market improved further. Fed Chair Janet Yellen said US growth was looking stronger and rate increases would be needed to keep the economy from overheating and fueling high inflation.

The pan-European STOXX 600 index rose for a second straight session and was up 0.7 per cent by 0748 GMT after touching its highest level in two weeks. However, the index is still down around 6 per cent so far this year.

“Markets are getting support not only from the inaction of the Fed but also the relatively dovish comment by Janet Yellen. A rate hike is probable in December, but it has once again become clear that rates will go up only very gradually,” said Philippe Gijsels, head of research at BNP Paribas Fortis.

“With The Fed out of the way for some time, markets will start to focus on other things. The presidential election in the U.S. is just one of them. Volatility is probably the only certainty in the remaining months of the year.”

Miners led the European stock market higher as the Fed’s decision to keep rates unchanged pushed down the U.S dollar on currency markets, thereby making commodities cheaper for holders of other currencies.

The STOXX Europe 600 Basic Resources index rose 2.8 per cent to its highest level since the middle of August. Shares in BHP Billiton, Anglo American, Rio Tinto and Fresnillo were up 2.7 to 3.4 per cent.

Energy shares were also in demand after oil prices also rose on a weaker dollar, extending gains from the previous session when a surprise third consecutive weekly U.S. crude inventory draw tightened supply.

The European oil and gas index was up 1.2 per cent, helped by a 1.3 to 1.5 per cent rise in BP, Royal Dutch Shell and Tullow Oil.

Among other sharp movers, EDF fell 2.4 per cent after the French nuclear power utility said it was cutting its 2016 earnings expectations due to lower output.

Banco BPI rose 3.8 per cent after Spain’s Caixabank launched a bid for the Portuguese lender and slightly raised its offer price. Caixabank shares were down 2.4 per cent. — Reuters

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