- Fed begins reducing stimulus
- US initial jobless claims increase
- UK retail sales rise
- EU reaches banking deal
FTSE 100: 1.27%
CAC 40: 1.46%
FTSE MIB: 1.61%
IBEX 35: 2.10%
Stoxx 600: 1.61%
European stocks advanced as the Federal Reserve's decision to reduce monetary stimulus ended months of uncertainty and lifted confidence in the recovery of the US economy.
The US central bank last night announced it would reduce its monthly bond-buying programme from $85bn to $75bn and make further cuts gradually, depending on economic data.
"Markets dislike uncertainty so, while the notion of more shallow liquidity might have had the consequence of a protracted sell-off, market participants can now focus on the underlying issues without the constant 'will they, won't they' taper concerns," IG noted.
Policymakers predicted that the jobless rate - currently at 7% - would drop to around 6.5% by the end of 2014. However, they stressed that interest rates would be held close to zero "well past the time that the unemployment rate declines below 6.5%, especially if projected inflation continues to run below the [FOMC's] 2% longer-run goal".
"The action today is intended to keep the level of accommodation the same overall and to push the economy forward," said Chairman Ben Bernanke. "We are committed to doing what is necessary to getting inflation back to target."
Today in the US, jobless claims climbed by 10,000 to 379,000 in the week ended December 14th, the most since the end of March, Labor Department data showed. Economists had called for a decrease to 336,000.
The Philadelphia Fed manufacturing index rose from 6.5 to 7.0 in December, compared with the consensus estimate of a jump to 10.
Existing-home sales fell for the third month in a row in November, dropping by 4.3% to a seasonally-adjusted annual rate of 4.9m, according to the National Association of Realtors. Analysts had expected a figure closer to 5m.
On a more positive note, an index of leading economic indicators increased 0.8% in November after gaining a revised 0.1% the prior month. The forecast was for a 0.7% rise.
UK retail sales rise modestly
UK retail sales rose by a modest 0.3% last month in line with consensus estimates, compared to October's 0.9% drop.
Clothing shoppers drove the increase as people sought warmer outfits in the colder weather, but it was offset by lower spending in department stores, according to the Office for National Statistics.
Meanwhile, Eurozone finance minsters this morning agreed a blueprint to close failing banks. However, they held back on a plan for the Eurozone to unit in tackling its struggling lenders.
The deal aims to prevent a repeat of the turmoil when failing banks in countries from Ireland to Cyprus brought their states to the brink of bankruptcy.
Saab gained after the Swedish maker of Gripen jets beat Boeing Co. and Dassault Aviation SA to win the contract to supply 36 jet fighters to Brazil.
AstraZeneca edged higher after spending up to $4.1bn to buy Bristol-Myers Squibb's stake in their diabetes joint venture, giving the British company full ownership of intellectual property and global rights for a large portfolio of products.
A gauge of miners declined, including Randgold Resources and Centamin, as the price of commodities fell.
Mediaset rallied after Deutsche Bank AG said that the Italian broadcaster's plan to spin off its pay-TV business could increase the company's profitability.
Amadeus advanced after the Spanish travel-reservations company forecast 2013 revenues and earnings that beat analysts' estimates.
Algeta surged after Bayer AG said it will buy the drugmaker for about 17.6bn kroner, a price that topped a preliminary offer.
The euro fell 0.18% to $1.3660.
Brent crude futures rose $0.742 to $110.450 per barrel on the ICE.