* STOXX Europe 600 up 0.4 pct
* Banking stocks rally
* Miners also in demand
(Adds details and quotes, updates prices)
By Kit Rees
LONDON, Sept 21 European shares hit a one-week
high on Wednesday before the outcome of a Fed meeting, with
banks rallying after a policy overhaul at the Bank of Japan
lifted risky assets globally.
The U.S. Federal Reserve is expected to keep rates unchanged
after a two-day policy meeting amid tepid inflation and weak
economic data, but could signal an increased likelihood of a
hike by the end of the year.
The pan-European STOXX 600 index closed 0.4 percent
firmer after rising to 344.90 points earlier in the session, its
highest level since Sept. 9, helped by stronger financials.
The European banking index rose 2 percent, the best
one-day percentage gain in a month. Spain's Banco Popular
jumped 9.1 percent after saying it would cut around 300
bank branches as part of a restructuring plan.
Europe took its cue from Asian markets, which welcomed the
Bank of Japan's decision to adopt a target for long-term
interest rates. Investors also awaited the U.S. Federal
Reserve's decision on interest rates, which were expected to be
"Today's policy decision is marginally positive for bank
stocks and other risk assets for the short-term as the bank
refrained from cutting the short-term rate to a further negative
level, but the sustainability of the risk asset rally is
questionable," said Tomoya Masanao, Head of Portfolio Management
Japan at PIMCO.
"The BOJ's policy exhaustion is increasingly clear."
Shares in Natixis and UBI Banca were up
4.1 percent and 5.4 percent respectively, while Barclays
, up 3.1 percent, also rose on the back of an upgrade to
"buy" from HSBC, which said the sale of the bank's non-core
businesses would produce value for shareholders.
J.P. Morgan's price target upgrade for Dutch bank ING Groep
also helped lift the stock 3.2 percent.
"We remain constructive on Dutch banks, whose valuations at
c.9% discount to the sector don't sufficiently reflect their
earnings resilience, in our view," analysts at J.P. Morgan said
in a note.
Among other sectoral gainers, miners were in demand after
prices of gold and aluminium rose. Shares in Anglo American
, Fresnillo, Rio Tinto and Randgold
Resources advanced 1.9 to 3.6 percent.
Among the fallers, Ocado Group dropped 5.3 percent
after Deutsche Bank cut its rating on the stock to "sell" from
"hold", while ADP fell 3 percent after UBS cut its
price target for the stock to 95 euros from 110 euros.
(Additional reporting by Atul Prakash; editing by Andrew Roche)