UPDATE 3-European shares rally after ECB pushes back rate hike bets
* STOXX 600 jump 1.4 pct
* ECB to end bond buys, keep rates steady through nextsummer
* Rolls Royce eyes savings, shares up (Updates prices, adds quotes, details)
MILAN/LONDON, June 14 (Reuters) - European shares jumped onThursday after the European Central Bank said interest rateswould stay at record lows at least through the summer of 2019 asit announced an end to its massive stimulus plan.
Stock benchmarks across Europe enjoyed their best day in2-1/2 months as they benefited both from a weaker euro and thesurprise extension of lower interest rates.
The pan-European STOXX 600 .STOXX and the euro zone STOXX .STOXXE jumped 1.4 and 1.3 percent, while the exporter-heavyGerman index .GDAXI gained 1.7 percent as the euro fell to asession low following the ECB's statement. urn:newsml:reuters.com:*:nL9N15N018
Along with France's CAC 40, they had their strongest gainssince April 5.
Edmund Shing, head of equity derivatives at BNP Paribas,said low rates for longer was a boon for equities as it ensuredliquidity remained strong.
"One of the key drivers for risk assets has been andcontinues to be liquidity, beyond all other things. The longerthey delay rate hikes the longer liquidity stays decent," hesaid.
"The hawks had been guiding for a June hike before themeeting and given the clear guidance the ECB gave today oninterest rates, it had to be priced out," said AFS Group analystArne Petimezas.
"It doesn't seem like we're at the stage where the hawks areon top of things," he added.
Interest-rate sensitive sectors such as autos and utilities surged, while the euro zone's banking stocks .SX7E , whichsuffer from low interest rates, fell 0.2 percent, among the onlystocks in negative territory.
Germany'sCommerzbankCBKG.DE , Spain's Bankia BKIA.MC ,and Italy'sUnicreditCRDI.MI were the biggest fallers, down1.2 to 2 percent.
"It's a disappointment" for banks, said BNP Paribas' Shing,adding that the ECB's negative deposit rate costs banks money.
"The faster the deposit rate gets back to 0, the better forbanks' profitability."
If the ECB succeeds in supporting the economy andproductivity, however, this could have positive knock-on effectsfor banks through boosting demand for financing and alleviatingthe burden of non-performing loans, he added.
The autos sector .SXAP rose 1.8 percent, its strongestgains in 2 1/2 months, also boosted by a weak euro.
Rolls-RoyceRR.L gained 6.5 percent after saying it wouldsave 400 million pounds ($535 million) a year by cutting 4,600jobs in its latest attempt to simplify the business and generatemore cash. urn:newsml:reuters.com:*:nL8N1TG0QV
"After spending around four and half years in purdah, an incremental 400 million pounds of FCF (free cashflow) would allow Rolls-Royce to take a significant step toward meeting its financial targets," Jefferies analystssaid.
"That should then mean Rolls-Royce can make an adequate annual return to shareholders through the dividend."
Danish hearing equipment maker GN Store NordGN.CO was thetop gainer on the STOXX, up 12.2 percent after it upped its 2018sales and profit forecasts for its headset business. urn:newsml:reuters.com:*:nL8N1TG1AQ
Shares in heavyweight drugmaker GSK GSK.L rose 2.3percent. Investors welcomed news its two-drug treatment for HIVmet its main goal in late stage studies - a boost afterregulators warned of possible birth defects from one of the twodrugs. urn:newsml:reuters.com:*:nL8N1TG0V4
On the DAX, VolkswagenVOWG_p.DE rose 2.2 percent. It fellin early trading after the carmaker was fined one billion eurosover diesel emissions cheating. urn:newsml:reuters.com:*:nL8N1TF5GB ($1 = 0.7482 pounds) (Reporting by Danilo Masoni and Helen Reid; Editing by AlisonWilliams) ((Danilo.Masoni@TR.com; +39-02-66129734; Reuters Messaging:email@example.com; On Twitter https://twitter.com/damasoni))