Europe Stocks Rebound as Gains Accelerate in Final Trading Hour

(Bloomberg) -- European stocks rebounded from a selloff that sent equities to an almost six-week low, with gains accelerating in the final hour of trading.

A weakening pound following the Bank of England’s update boosted U.K. exporters, while European equities also took their cue from rising U.S. shares. The Stoxx Europe 600 Index rose 0.6 percent at the close, the most in almost two weeks, halting its longest stretch of losses since June.

The Bank of England maintained its monetary policy, while signaling there’s a chance for another rate cut this year as it assessed the fallout from Britain’s secession vote. Diageo Plc, British American Tobacco Plc and HSBC Holdings Plc, which get most of their revenue outside the U.K., added at least 1.3 percent. The FTSE 100 Index rallied 0.9 percent for the best performance among western-European benchmarks.

“Markets are at the mercy of central banks,” said Thomas Thygesen, SEB AB’s head of cross-asset strategy in Copenhagen. “There are concerns about growth and you really want central banks to tell you that they see it and that they get it.”

In the U.S., data on retail sales and industrial production missed projections as investors awaited the Federal Reserve’s next meeting. Traders are now pricing in an 18 percent chance of a rate hike on Sept. 21, down from 28 percent a week ago. December is the first month with at least even odds of an increase. The S&P 500 rebounded from a two-month low.

“A positive start to trading for the U.S. has helped lift European stocks, with a raft of disappointing data points driving a new leg higher as markets adjust to the shifting expectations that go with it ahead of next week’s Fed meeting,” Chris Beauchamp, a market analyst at IG in London, wrote in a note.

The Stoxx 600 fell 3.4 percent in the past five sessions, shattering a summer calm, as the European Central Bank downplayed the need for more stimulus and Fed officials gave mixed signals on prospects for higher borrowing costs. Also weighing on equities has been concern about the economy, with euro-area data missing forecasts by the most since April.

Retailers were among shares active on corporate news:

* Wm Morrison Supermarkets Plc jumped 7.5 percent after the British grocer reported sales and earnings that beat analysts’ estimates.
* Siemens AG climbed 3 percent after its chief executive officer said the engineering firm may beat its earnings forecast for the year ending this month.
* Moncler SpA added 3.9 percent on a report that China’s Fosun International Ltd. has had an interest in investing in the Italian maker of luxury skiwear.
* Hennes & Mauritz AB declined 4.3 percent after the Swedish fashion retailer said August sales were hurt by hot weather.
* Next Plc slid 4.9 percent after saying the current quarter will be its toughest this year and Brexit-induced price increases will hurt 2017 sales.
* Tod’s SpA slipped 6 percent. Raymond James Financial Inc. cut its estimate on second-half sales growth, saying the shoemaker mentioned no change in momentum after a decline in the earlier period.

To contact the reporters on this story: Namitha Jagadeesh in London at njagadeesh@bloomberg.net, Sofia Horta e Costa in London at shortaecosta@bloomberg.net. To contact the editors responsible for this story: Cecile Vannucci at cvannucci1@bloomberg.net, Namitha Jagadeesh, Alan Soughley