European shares hit six-week highs as BoE bolsters Fed-fuelled rally

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UPDATE 3-European shares hit six-week highs as BoE bolsters Fed-fuelled rally

* BoE cuts Q2 economic growth forecast

* U.S. central bank holds rates steady

* Italy leads gains among major indexes

* Deutsche Bank falls on report of U.S. probe (Updates to close)

By Susan Mathew and Medha Singh

June 20 (Reuters) - European stocks surged to six-week highson Thursday, as dovish signals from the Bank of England andFederal Reserve, allied to optimism around the resumptionU.S.-China trade talks, saw investors piling into riskierassets.

The pan-European STOXX 600 index .STOXX finished 0.4%higher, with most country indices in the black as investorsglobally priced in the prospect of an easing of U.S. interestrates next month and more to follow.

The Bank of England, in contrast to the Fed, continues tothreaten to raise and not lower rates, but its June meeting sawthe Monetary Policy Committee slash second quarter growthforecasts to zero, heading off any market fears that it wouldactually deliver a hike anytime soon. urn:newsml:reuters.com:*:nL8N23R32A

"The Bank of England was never going to rock the boat withan interest rate rise, given static economic conditions and acontinued lack of direction on Brexit," Laith Khalaf, a senioranalyst at Hargreaves Lansdown wrote in a note.

"(But) with the Fed now striking a more dovish pose as italso sees rising downside risks in the global economy, weshouldn't entirely rule out the possibility the next interestrate move may be downwards."

London's FTSE 100 .FTSE saw a sharp rise after the BoEstatement, and hit session highs increasing as much as 0.7%,before closing up 0.3%. .L

Italy's FTSE MIB index .FTMIB was the outstandingperformer of the big European markets, rallying 0.7%, withanalysts pointing to signs the European Commission could holdoff on moves to discipline the country over rising debt. urn:newsml:reuters.com:*:nL8N23Q4R9

Expectations of policy easing have helped drive a near 5%gain for the STOXX 600 this month, helping the main index recoupalmost all of a steep sell-off that made May the worst month inmore than two years.

Tumbling euro zone bond yields pointed to more respite forEuropean public and private sector borrowers, while pressuringinterest-rate-sensitive banking stocks .SX7P , which lost 1.3%as the worst-performing European sector.

Signs the United States and China will return to thenegotiating table over trade also bolstered sentiment, withtariff-sensitive auto .SXAP and technology stocks .SX8P gaining 0.8% and 1.6% respectively. urn:newsml:reuters.com:*:nL2N23Q0ET

Germany's DAX .GDAXI hit its highest level in almost ninemonths, helped by software company SAP SAPG.DE advancing 1.5%after arch-rival OracleORCL.N forecast current-quarter profitabove estimates. urn:newsml:reuters.com:*:nL4N23Q42B

German food delivery company Delivery HeroDHER.DE jumped9.7%, the most on the benchmark index, after raising its fullyear revenue outlook by 200 million euros. urn:newsml:reuters.com:*:nL8N23R1FP

One high-profile decliner was Deutsche Bank AGDBKGn.DE ,which slipped 2.6% after a report U.S. federal authorities areinvestigating whether the German lender complied with laws meantto stop money laundering and other crimes. urn:newsml:reuters.com:*:nL2N23R049

Swiss shares .SSMI hit new all-time highs in the sessionas watchmakers got a boost from better than expected Swiss watchexports data for May. urn:newsml:reuters.com:*:nL8N23R1D4

Swatch UHR.S shares topped the index, up 2.2%, whileRichemont CFR.S rose 0.2%.

Price performance of London's FTSE 100 index     https://tmsnrt.rs/2RosXGd
(Reporting by Amy Caren Daniel, Medha Singh and Susan Mathew inBengaluru; Editing by Catherine Evans and Ed Osmond) ((Amy.CarenDaniel@thomsonreuters.com ; within U.S.+1-646-223-8780; outside U.S. +91 80 6749 9250 ; ReutersMessaging: Amy.CarenDaniel.thomsonreuters.com@reuters.net;))

This article appears in: Politics , World Markets , Economy , US Markets , Stocks
Referenced Symbols: CFR ,

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