By Carla Mozee, MarketWatch

After Fed decision, regional bank index jumps to one-month high

European stocks ended mostly higher on Thursday, with banks stocks marching higher after the U.S. Federal Reserve indicated it will continue to raise official interest rates.

The Stoxx Europe 600 index rose 0.2% to 382.88, closing at its highest level since July 20. On Wednesday, the benchmark closed fractionally lower (http://www.marketwatch.com/story/european-stocks-mark-time-as-investors-stay-focused-on-fed-decision-2017-09-20) as investors marked time before the highly anticipated Fed policy announcement.

After European trade closed Wednesday, the Fed said it would begin to shrink its huge $4.5 trillion balance sheet in October (http://www.marketwatch.com/story/feds-yellen-says-low-inflation-a-mystery-but-not-mysterious-enough-to-keep-rates-low-2017-09-20). The U.S. central bank also signaled plans for one more increase in interest rates before the end of 2017, which should lift borrowing costs for auto loans, mortgages and business loans. Fed policy makers also hinted at another three rate increases in 2018.

The prospect of higher interest rates bolstered bank stocks on Wall Street and in Europe, where the Stoxx Europe 600 Bank Index charged up 1.4% to a more-than one-month high.

In that index, Deutsche Bank AG (DBK.XE) (DBK.XE) popped up 2.7%, Société Générale SA (GLE.FR) picked up 2.2% and Banco Santander SA (SAN) moved up 1.2%.

"Before the Fed announced its decision, there were high expectations that monetary policy makers would drag interest rate expectations lower for 2017," said Hussein Sayed, chief market strategist at FXTM.

"Instead, the U.S. central bank decided to look past low inflation and said the harm of the hurricanes would have no lasting economic impact," he said in a note, referring to damage from recent Hurricanes Harvey and Irma.

Sayed said markets have higher expectations for an interest-rate increase in December, with investors now seeing a 70% chance of a hike, up from 50% before the Fed decision.

Stock movers: Elsewhere in the banking group, shares of Commerzbank AG (CBK.XE) rallied 3.5%, extending gains Wednesday following a Reuters report (https://uk.reuters.com/article/uk-unicredit-merger-commerzbank-exclusiv/exclusive-italys-unicredit-signals-interest-in-deal-with-germanys-commerzbank-sources-idUKKCN1BV1XS) that Italy's UniCredit SpA (UCG.MI) is interested in merging with the state-backed lender. But the German government favors Commerzbank tying up with France's BNP Paribas SA (BNP.FR), Reuters reported Thursday. BNP shares bulked up 1%, while UniCredit shares ended 2% higher.

CRH PLC (CRG.DB) shares gained 2.4%. The Irish building materials supplier plans to buy Ash Grove Cement Co (http://www.marketwatch.com/story/crh-agrees-to-buy-ash-grove-cement-in-35-billion-deal-2017-09-21).(ASHG) in a deal valuing the U.S. cement provider at $3.5 billion, the companies said.

Capita PLC shares (CPI.LN) plunged 12% after the outsourcing and professional services company posted a 26% fall in pretax profit for the first half of the year (http://www.marketwatch.com/story/capita-profit-falls-26-but-trading-in-line-2017-09-21). It did say that trading was broadly in line with expectations.

Ryanair Holdings PLC (RYAAY) erased an earlier loss to close up 0.1%, after a group of the air carrier's pilots on Wednesday reportedly rejected a cash bonus (http://www.bbc.co.uk/news/business-41342309) to work extra days after Ryanair's cancellation of more than 2,000 flights.

Johnson Matthey PLC (JMAT.LN) surged 15% after the catalyst maker revealed plans to tap into the electric car battery market.

Indexes: Germany's DAX 30 index rose 0.3% to 12,600.03, and France's CAC 40 index picked up 0.5% to 5,267.29.

The U.K.'s FTSE 100 index fell 0.1% to 7,263.90. Spain's IBEX 35 advanced 0.1% to 10,297, after closing 1.2% lower on Wednesday as Spanish police arrested 13 Catalan officials (http://www.marketwatch.com/story/catalan-officials-arrested-in-spain-ahead-of-banned-independence-vote-2017-09-20) in a battle over a regional independence referendum.

The euro bought $1.1951, up from $1.1895 late Wednesday in New York. The dollar had earlier pushed higher against major rivals after the Fed's plans to wind down its bond-buying program.

Read:Don't call the German election boring--it could be huge leap or setback for the eurozone (http://www.marketwatch.com/story/dont-call-the-german-election-boring-it-could-mean-a-huge-shift-for-the-eurozone-2017-09-18)

(http://www.marketwatch.com/story/dont-call-the-german-election-boring-it-could-mean-a-huge-shift-for-the-eurozone-2017-09-18)Also read:German election: Who's Merkel up against and what are their chances? (http://www.marketwatch.com/story/german-election-whos-merkel-up-against-and-how-could-they-shape-the-new-government-2017-08-31)

 

(END) Dow Jones Newswires

September 21, 2017 12:11 ET (16:11 GMT)

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