European equities rise on weaker euro, higher dividends

EUROPEAN shares rose sharply, helped by a lower euro and announcements from Metro and LafargeHolcim that they will pay more cash to investors through dividends.

The pan-European FTSEurofirst 300 ended up 1.43 percent, after losing 1.6 percent in the first two sessions of the week. Germany’s export-heavy DAX, which benefits the most from a weaker euro, rose 2.15 percent.

The euro fell to a seven-month low against the dollar before recovering on Wednesday, after Reuters reported the ECB is considering policy options such as whether to stagger charges on banks hoarding cash or to buy more debt.

Spain’s IBEX index gained just 0.2 percent, weighed down by losses among its banks, partly due to their exposure to troubled Spanish energy firm Abengoa, which fell 52 percent after starting insolvency proceedings.

Spanish banks recovered some ground after the European Banking Authority corrected some of the capital adequacy ratio numbers it published on European Union banks.

In the original report, Spanish banks appeared to have the lowest capital ratios, an average of 9 percent on a “fully loaded” basis. That was later changed to 10 percent.

German retailer Metro gained 5.8 percent after it raised its dividend more than expected and said it would pay out more of its profits every year from now on, citing the positive effects of restructuring and significantly improved debt.

Analysts at Baader-Helvea equity research said the dividend increase was “positive news and a strong sign.”

LafargeHolcim gained 4.3 percent after proposing a dividend payout higher than the one it suggested earlier this year, despite its profit missing expectations.

Traders said the reported results were disappointing, but prospects for the future looked much better. They said with further stimulus anticipated from the European Central Bank next month, high-yielding stocks would remain in favour.

Volkswagen rose 3.8 percent after saying a technical fix to bring 8.5 million cars in Europe in line with emissions rules turned out to be simpler than expected. But the company said it would not lower planned provisions of 6.7 billion euros for the costs of its emissions-rigging scandal.

Also among top gainers were UK-listed housebuilders such as Persimmon, Barratt Developments and Taylor Wimpey, after British finance minister George Osborne increased the government’s housing budget. They came off earlier highs as Osborne also announced plans to raise property tax for second homes and property bought in order to rent it.