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8 months ago
European shares extends gains; banks rally after ECB cuts asset buys
December 8, 2016 / 1:40 PM / 8 months ago

European shares extends gains; banks rally after ECB cuts asset buys

(ADVISORY- Follow European and UK stock markets in real time on the Reuters Live Markets blog on Eikon - see cpurl://apps.cp./cms/?pageId=livemarkets) Adds details, updates prices after ECB decision)

* STOXX Europe 600 up 0.6 pct

* ECB cuts asset monthly asset purchases

* Banks, miners lead sectoral gainers

* Fingerprint sinks as cuts forecast

By Danilo Masoni and Atul Prakash

MILAN/LONDON, Dec 8 (Reuters) - European shares rose on Thursday, extending earlier gains as banks climbed further following the European Central Bank's unexpected decision to cut its monthly asset purchases.

The ECB move pushed euro zone bond yields broadly higher, which in turn further boosted banking shares with Europe's STOXX 600 Bank index rising 2 percent.

Higher yields are seen helping reduce pressure on margins for a sector which has been struggling to grow due to sluggish economic growth and ultra low interest rates.

"The ECB announced today that it will begin tapering its asset purchases ... in a clear sign that it is reaching the limits of what it is willing to do under the bond buying program," ONADA analyst Craig Erlam said in a note.

The ECB said it would cut its asset purchases to 60 billion euros per month from next April from the current 80 billion euros, adding asset buys will run until the end of 2017, or longer if necessary.

The pan-European STOXX 600 index was up 0.6 percent to its highest since early September.

Across Europe, Italy's FTSE MIB index rose 1.3 percent to its highest since late May, supported by a 4.6 percent rise in its banking index to a five-month high.

Italian banks have risen strongly this week, with investors betting that there could be an agreement to help rescue troubled lender Monte dei Paschi di Siena, even though Prime Minister Matteo Renzi resigned following a defeat in a referendum over constitutional reform.

Monte dei Paschi rose for a third straight day and was last up 6.8 percent. The bank has asked the ECB for more time to wrap up a 5 billion euro ($5.4 billion) rescue plan that was thrown into doubt by Renzi's resignation.

Miners were also in demand, with the regional index rising 2.2 percent after metals prices rose on a softer U.S. dollar and strong Chinese commodities import figures.

Elsewhere, shares in Swedish biometric technology firm Fingerprint Cards fell 10 percent, the top decliner in the STOXX Europe 600 index, after the company sharply cut its 2016 revenue forecast.

Bookmakers Ladbrokes Coral and William Hill fell 5.2 percent and 7 percent respectively after The Times reported a cross-party group of MPs would demand on Thursday stricter controls on betting machines. (Reporting by Danilo Masoni; Editing by Raissa Kasolowsky)

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