(RTTNews.com) - The European markets bounced back from three consecutive sessions of declines on Thursday and finished solidly in positive territory. The rally was driven by optimism about a potential end to the budget deadlock in Washington. With the partial shutdown of the U.S. government reaching day 10, lawmakers appear to be getting closer to a resolution.
President Barack Obama will meet with the House Republican Leadership at the White House this afternoon. They are expected to discuss a possible short-term deal to fund the government and raise the debt ceiling.
Ahead of the meeting with House Republicans, President Obama will meet with Senate Democrats, while Treasury Secretary Jack Lew testified on Capitol Hill this morning in an effort to convince lawmakers of the perils of default.
Concerns about a government shutdown kept the Federal Reserve from scaling back its monetary stimulus last month, according to the minutes of the Fed's September 16-17 meeting.
Wall Street expected the Fed to taper its $85 billion per month bond-buying plan, but in a "close call" most policy makers chose to leave the program in place.
Still, the minutes show most Fed members anticipate the economy will be strong enough to begin winding down QE3 this year and ending it completely by the middle of 2014.
President Barack Obama announced the nomination of Dr. Janet Yellen as the next Chair of the Federal Reserve on Wednesday. Noting that Yellen would be the first woman Chair of the Fed, Obama expressed confidence that she would do an excellent job and urged the Senate to confirm her nomination without delay.
The Bank of England kept its key interest rates and quantitative easing unchanged as it was felt currently, there is little need for additional stimulus to support the economy.
The nine-member monetary policy committee headed by Mark Carney concluded the two-day rate setting meeting by holding the key rate at a record low 0.50 percent and the size of monetary stimulus at GBP 375 billion.
The central bank introduced forward guidance in August, linking the interest rate outlook to unemployment for the first time in its history. Accordingly, the rate is set to remain on hold at 0.50 percent until 2016.
European Central Bank Chief Mario Draghi said Wednesday that he expects the EU's bank resolution mechanism for winding down troubled banks to be in place by 2015.
The establishment of a banking union has been agreed by Heads of State and Government in Europe and is now being delivered in stages, starting with the single supervisory mechanism, Draghi said in a speech at Harvard Kennedy School, Cambridge.
"This has been entrusted to the ECB and has recently been approved by the European Parliament. We trust that a single resolution mechanism will enter into force by the beginning of 2015," he said.
The European Central Bank and the People's Bank of China on Thursday established a bilateral currency swap agreement in the context of rapidly growing bilateral trade and investment between the euro area and China.
The deal will be valid for three years and will have a maximum size of CNY 350 billion when yuan are provided to the ECB and of EUR 45 billion when euro are provided to the PBoC, the central banks said in a joint statement.
From the perspective of the Eurosystem, the ECB said the swap arrangement is intended to serve as a backstop liquidity facility and to reassure euro area banks of the continuous provision of Chinese yuan.
The Euro Stoxx 50 index of eurozone bluechip stocks increased by 2.14 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, added 1.53 percent.
The DAX of Germany climbed by 1.99 percent and the CAC 40 of France advanced by 2.21 percent. The FTSE 100 of the U.K. rose by 1.40 percent and the SMI of Switzerland gained 1.24 percent.
In Frankfurt, Commerzbank increased by 6.03 percent and Deutsche Bank added 2.97 percent.
Volkswagen and BMW gained 2.59 percent and 2.13 percent, respectively. Daimler finished up by 1.57 percent.
Suedzucker climbed by 4.40 percent, after announcing financial results.
Semiconductor firm Aixtron fell by 3.01 percent, after a broker downgrade at HSBC.
ProSiebenSat.1 Media increased by 3.84 percent. HSBC upgraded the stock to ''Overweight'' from ''Neutral.''
In Paris, Renault increased by 4.36 percent and Peugeot added 1.27 percent.
Axa advanced by 4.94 percent, after Macquarie upgraded the stock to ''Outperform'' from ''Neutral.''
Societe Generale climbed by 3.79 percent. BNP Paribas and Credit Agricole gained 3.67 percent and 3.18 percent, respectively.
UBS downgraded Lafarge to ''Neutral'' from ''Buy.'' However, the stock finished up by 2.18 percent.
In London, GKN increased by 4.37 percent. The engineering group appointed Adam Walker to succeed Bill Seeger as Group Finance Director on February 26, 2014.
WH Smith surged by 5.63 percent. The retailer reported a higher annual profit and announced increased dividend as well as a share buyback program for additional 50 million pounds.
Defence and security firm BAE Systems said its outlook for full-year 2013 remains unchanged. The stock rose by 2.43 percent.
Givaudan dropped by 2.57 percent in Zurich, after reporting a decline in third-quarter sales.
Eurozone house prices increased in the second quarter, recovering from a sharp fall recorded three months ago, data from European statistical agency Eurostat revealed Thursday. House prices euro area rose 0.3 percent quarter-on-quarter in the second quarter following a 1.4 percent decline in the first quarter.
Turnover in the German manufacturing sector increased in August, after falling in the previous months, data released by the Federal Statistical Office showed Thursday. Manufacturing turnover increased a seasonally and working-day adjusted 2.3 percent month-on-month in August, reversing the declines of 0.7 percent and 0.4 percent seen in July and June.
French industrial production increased for the first time in four months in August, data from statistical office Insee showed Thursday. Output increased 0.2 percent month-on-month in August following a 0.6 percent decline in July. Economists had forecast a 0.6 percent increase.
Italy's industrial production declined 0.3 percent month-on-month in August, the statistical office Istat showed Thursday. Production was expected to grow 0.6 percent after falling 1 percent in July. On a yearly basis, industrial output plunged by unadjusted 7.6 percent in August. At the same time, working-day adjusted output dropped 4.6 percent annually, sharper than the expected 4.2 percent fall.
Unemployment in Greece increased further in July, but at a slower pace than expected by economists, as economic activity continued to be hit by the ongoing recession.
The seasonally adjusted unemployment rate moved up to 27.6 percent in July from 27.5 percent in June, which was revised down from 27.9 percent, data released by the Hellenic Statistical Authority showed Thursday. Economists had forecast the jobless rate to rise to 28 percent.
While the data was once again impacted by technical issues, the Labor Department released a report on Thursday showing that first-time claims for U.S. unemployment benefits rose by much more than expected in the week ended October 5th.
The report said initial jobless claims jumped to 374,000, an increase of 66,000 from the previous week's unrevised figure of 308,000. Economists had been expecting jobless claims to edge up to 310,000.
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