EUROPE MARKETS: European Stocks Rise In Fed-fueled Rally

By Sara Sjolin, MarketWatch

LONDON (MarketWatch) -- European stock markets rose on Thursday, after U.S. Federal Reserve Chairman Ben Bernanke indicated he is still supportive of monetary stimulus.

The Stoxx Europe 600 index climbed 0.6% to close at 296.54, extending gains into a fourth straight day.

The index also closed at the highest level in five weeks, as investors picked up stocks that were recently hit hard by indications the U.S. Federal Reserve could start tapering its asset purchases.

The Fed was further in the spotlight in Thursday's trade after Chairman Bernanke said late Wednesday that short-term interest rates will stay low, even if the unemployment rate falls below the 6.5% threshold. The jobless rate was 7.6% in June.

Additionally, minutes from the Fed's latest policy meeting showed that about half of its 19 senior officials said they would like to end the central bank's monthly purchases of $85 billion in bonds by the end of the year, while many see a need for continued easing next year.

"Markets interpreted the Fed minutes as a dovish message and acted accordingly. I'm not entirely sure we're not getting ahead of ourselves here, because it was actually not very different from what we've heard in the past," said Peter Dixon, strategist at Commerzbank in London.

"The U.S. is doing okay and getting momentum behind it. At this stage, the Fed just doesn't want to pull the rug from the under the table, because it could cause problems, but they are saying: 'Be aware, at some point we'll take the rug away,'" he added.

U.S. stock traded higher on Wall Street Thursday.

Movers

Among the biggest movers in the pan-European index, shares of Associated British Foods PLC rose 5.1% after the ingredients maker and owner of Primark clothing stores said revenue for the 40 weeks to June 22 was up 9%.

Shares of Telekom Austria AG added 3.7% after Goldman Sachs lifted the firm to neutral from sell.

Shares of G4S PLC dropped 5.6% after U.K. Justice Secretary Chris Grayling asked the Serious Fraud Office to investigate the security firm for overcharging the government for electronic tagging for criminals.

Serco Group PLC was also suspected of overcharging, but agreed to take part in a forensic audit. The shares slumped 7.9%.

Among country-specific indexes in Europe, Germany's DAX 30 index rose 1.1% to 8,158.80. Banks posted some of the biggest gains, with Commerzbank AG up 2.3% and Deutsche Bank AG (DB) 0.9% higher.

France's CAC 40 index gained 0.7% to 3,868.98 and the U.K.'s FTSE 100 index rose 0.6% to 6,543.41.

Miners rallied in London, as most metals prices moved north. Shares of Anglo American PLC gained 5.4%, Rio Tinto PLC (RIO) rose 4.6% and BHP Billiton PLC (BHP) added 4.6%.

Bucking the positive trend in Europe, Portuguese stocks sank amid political instability. President Anibal Cavaco Silva in a surprise move reportedly urged the ruling coalition and opposition to reach an agreement to push through austerity measures needed to complete Portugal's bailout program. The PSI 20 index dropped 2% to 5,423.29.

Euro zone to grow in 2014

Analysts at UBS cut their 2013 growth forecast for the euro zone to negative 0.7% from a previous estimate of negative 0.4%. At the same time they lifted the 2014 outlook to 0.8% economic expansion from 0.7%.

"The reason for the downward revision for 2013 is largely backward looking. We continue to expect the euro zone to show increasing signs of a modest recovery over the coming months," they said.

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