- Fed keeps QE unchanged
- ECB concerned over banking review
- Swiss National Bank defends cap on franc
FTSE 100: 1.45%
CAC 40: 1.05%
FTSE MIB: 1.08%
IBEX 35: 1.05%
Stoxx 600: 0.92%
European stocks rose to a five-year high after the Federal Reserve unexpectedly decided to keep its monetary stimulus unchanged.
The central bank's Federal Open Market Committee (FOMC) said it would maintain its $85bn of monthly asset purchases until it sees more evidence of recovery.
"Accordingly, the Committee decided to continue purchasing additional agency mortgage-backed securities at a pace of $40bn per month and longer-term Treasury securities at a pace of $45bn per month," the FOMC said following its two-day policy meeting.
Economists had expected the Fed to announce a tapering of between $10bn to $15bn per month.
ETX Capital Market Strategist Ishaq Siddqi predicts the Fed Chairman Ben Bernanke will announce a trimming its bond buying programme at the end of the year.
"Bernanke had his chance to fire the first round but held back," he said. "His reasons appear to be valid; there's going to be a big fiscal showdown in US Congress over the new budget to lift the debt ceiling. That said, Bernanke is on his way out with a new Fed president replacing him at the start of 2014.
"Given that market participants were prepared for tapering and that logically, it would have been sensible for Bernanke to start the taper ball rolling, I feel the Fed failed to seize on the opportunity to send the market a strong message by withdrawing its favourite drug."
"Risk sentiment may have got a nice kick up after the Fed meeting but the momentum behind this rally is certainly not credible, just like the Fed's reputation at the moment."
ECB fears bank review will scare investors
The European Central Bank is worried investors might be scared off by its reviews of banks next year when it takes over supervision of all euro-area lenders.
The ECB will conduct a risk review, analyse banks' balance sheets and implement stress tests in collaboration with the London-based European Banking Authority.
The central bank is trying to avoid releasing conflicting numbers at different times, particularly for banks that are financially unstable, at risk of deterring investors.
ECB Executive Board member Peter Praet and Governing Council member Ewald Nowotny said two companies must avoid giving different estimates of how much extra capital banks will need to raise.
Meanwhile, the Swiss National Bank said its cap on the franc remains "very, very important" for the country's economic growth despite signs of recovery in Europe.
The SNB has kept its ceiling on the franc at 1.20 per euro. The central bank set the cap in September 2011, citing the risk of deflation and a recession after investors concerned about the region's sovereign debt crisis pushed the franc close to parity with the euro.
"The global recovery is very slow," Swiss National Bank President Thomas Jordan told Swiss Radio SRF in an interview after the Zurich-based central bank's quarterly policy review on Thursday. "The risks may have receded, but they've not disappeared."
Miners gain on gold increase
Randgold Resources and Fresnillo advanced as the price of gold rose on Wednesday.
Asos surged as Jefferies International issued a 'buy' rating after the online fashion retailer beat fourth quarter forecasts.
ThyssenKrupp gained after Steinbrueck, who leads the opposition party Social Democrats, said it was "imperative" to prevent a break-up of the German steelmaker.
Havas declined after Barclays downgraded the French advertising company to 'equal weight' from 'overweight'.
Cie. Financiere Richemont, which owns the Cartier brand, rallied after a report showed watch exports rose 0.5% in August from a year earlier.
Other asset classes climb
The euro rose 0.27% to the 1.3557 US dollar.
Brent crude futures increased $0.235 to $110.860 per barrel.