Reuters/Paris


European stocks rallied yesterday, with Britain’s FTSE 100 and Germany’s DAX hitting record highs, after US Federal Reserve chair Janet Yellen said it was likely to be several months before the Fed raises interest rates.
Greek stocks were the top gainers after Athens delivered a list of economic reforms to the eurozone that helped it secure a four-month extension of its financial rescue.
Shares in National Bank of Greece, Alpha Bank, Bank of Piraeus and Eurobank surged 16-20%. Despite its recent rebound, the Greek banking sector remains below the level it traded at before last month’s election victory by the anti-austerity Syriza party.
The sector is still down 50% from February 2014, reducing the combined market value of Greece’s top four banks to €18.5bn ($20.9bn), about a fifth of the value of Spain’s Banco Santander, the eurozone’s biggest bank.
The FTSEurofirst 300 index of top European shares ended 0.5% higher at 1,543.29 points, a level not seen since late 2007.
Britain’s FTSE 100 ended 0.5% higher after hitting a record high of 6,958.89, surpassing its previous all-time high reached in late 1999.
In a subtle shift of emphasis that helps lay the groundwork for the Fed’s first rate hike since 2006, Yellen said its policy-setting committee was considering interest rate hikes “on a meeting by meeting basis”. She added that an increase was not likely for at least the next couple of meetings.
“It was a reassuring message from Yellen. The Fed will take its time before starting to raise rates, given the low inflation. So no change before the summer,” Saxo Bank trader Pierre Martin said. “Investors are loving it: the US economy is in good shape, very low unemployment, and rock-bottom interest rates. These are pretty powerful catalysts for the market.”
Among the top gainers yesterday in Europe, Dutch tech ASML rose 3.6% after saying it had passed a key performance milestone. Mining giant BHP Billiton surged 6.2%, driving a sector rally, after a smaller-than-expected drop in half-year profit.
Overall, fourth-quarter earnings are expected to grow by 19.5%, according to Thomson Reuters I/B/E/S, which would be Europe’s best earnings season since mid-2011 after three years of stagnating earnings.
European profits overall are still 30% below their peak of 2008, however, while US corporate profits have rebounded to 30% above their 2008 peak, Thomson Reuters Datastream data shows.
“This gap is the biggest we’ve ever seen by a huge margin. Now it’s going to start closing,” said Jonathan Bell, chief investment officer at Stanhope Capital, which oversees $9bn in assets.
“There’s scope for a reasonable rebound in European earnings, which is one of the reasons why we’re ‘overweight’ Europe equities.”