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* STOXX Europe 600 up 1.2 pct
* ECB cuts asset monthly asset purchases
* Banks, miners lead sectoral gainers
* Fingerprint sinks as cuts forecast
By Danilo Masoni
MILAN, Dec 8 European shares rose to their
highest in eleven months on Thursday as the European Central
Bank's unexpected decision to cut its monthly asset purchases
helped banks extend their rally.
The ECB move pushed long dated euro zone bond yields broadly
higher, which in turn further boosted banking stocks with
Europe's STOXX 600 Bank index rising 2.3 percent, on
track for their best week in five years.
"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," OANDA analyst Craig Erlam said in a note.
Higher yields are seen helping reduce pressure on bank
margins which have been pressured by sluggish economic growth
and ultra low interest rates.
"Banks typically outperform as yield curves steepen," said
Barclays, adding that banks such as Societe Generale,
ING and ABN Amro looked to be best placed to benefit
from rising long term rates.
The ECB said it would cut its asset purchases to 60 billion
euros per month from next April from the 80 billion euros, but
promised protracted stimulus to aid a still fragile recovery.
The European banking index, which is still down 6.8 percent
so far in 2016, was boosted earlier this week after investors
rushed into buying cheap Italian banks on bets a
solution to rescue ailing lender Monte dei Paschi
could be found, even involving state aid.
Such expectations helped shrug off concerns over political
instability in Italy after Prime Minister Matteo Renzi resigned
on the back of a resounding defeat on Sunday in a referendum
over his plans for constitutional reform.
The Italian banking index rose 3.6 percent to a five-month
high with Monte dei Paschi rising 4.1 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
Analyst said rescuing Monte dei Paschi through state aid
would make it easier for UniCredit to push through its own
mammoth capital increase early next year to beef up its balance
sheet. UniCredit rose 3 percent.
Shares in UniCredit, Italy's biggest lender, were also
buoyed by a 2.5 billion euros deal to sell its Polish assets.
Strong risers among other European banks included Spain's
Santander, Societe Generale and Credit Suisse
all up more than 3 percent.
The pan-European STOXX 600 index rose 1.2 percent
to its highest since Jan. 6, also helped by gains in other
cyclical sectors such as miners and autos.
Cyclical stocks got a further boost last month after Donald
Trump won the race for the White House, fuelling expectations of
big fiscal stimulus in the world's largest economy.
Both Germany's DAX and France's CAC blue
chip indexes are now showing a positive performance for the
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.
British bookmakers Ladbrokes Coral and William Hill
fell 2.7 percent and 6 percent respectively after The
Times reported a cross-party group of lawmakers would demand on
Thursday stricter controls on betting machines.
(Reporting by Danilo Masoni; Additional reporting by Atul
Prakash; Editing by Toby Chopra)