UPDATE 3-European shares rally after ECB pushes back rate hike bets

Reuters

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    * STOXX 600 jump 1.4 pct
    * ECB to end bond buys, keep rates steady through next
summer
    * Rolls Royce eyes savings, shares up

 (Updates prices, adds quotes, details)
    By Danilo Masoni and Helen Reid
    MILAN/LONDON, June 14 (Reuters) - European shares jumped on
Thursday after the European Central Bank said interest rates
would stay at record lows at least through the summer of 2019 as
it announced an end to its massive stimulus plan.
    Stock benchmarks across Europe enjoyed their best day in
2-1/2 months as they benefited both from a weaker euro and the
surprise 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-heavy
German index  .GDAXI  gained 1.7 percent as the euro fell to a
session low following the ECB's statement.  urn:newsml:reuters.com:*:nL9N15N018
    Along with France's CAC 40, they had their strongest gains
since April 5. 
    Edmund Shing, head of equity derivatives at BNP Paribas,
said low rates for longer was a boon for equities as it ensured
liquidity remained strong. 
    "One of the key drivers for risk assets has been and
continues to be liquidity, beyond all other things. The longer
they delay rate hikes the longer liquidity stays decent," he
said.
    "The hawks had been guiding for a June hike before the
meeting and given the clear guidance the ECB gave today on
interest rates, it had to be priced out," said AFS Group analyst
Arne Petimezas. 
    "It doesn't seem like we're at the stage where the hawks are
on top of things," he added. 
    Interest-rate sensitive sectors such as autos and utilities 
surged, while the euro zone's banking stocks  .SX7E , which
suffer from low interest rates, fell 0.2 percent, among the only
stocks in negative territory. 
    Germany's Commerzbank  CBKG.DE , Spain's Bankia  BKIA.MC ,
and Italy's Unicredit  CRDI.MI  were the biggest fallers, down
1.2 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 for
banks' profitability."
    
    AUTOS SECTOR 
    If the ECB succeeds in supporting the economy and
productivity, however, this could have positive knock-on effects
for banks through boosting demand for financing and alleviating
the burden of non-performing loans, he added.
    The autos sector  .SXAP  rose 1.8 percent, its strongest
gains in 2 1/2 months, also boosted by a weak euro. 
    Rolls-Royce  RR.L  gained 6.5 percent after saying it would
save 400 million pounds ($535 million) a year by cutting 4,600
jobs in its latest attempt to simplify the business and generate
more cash.  urn:newsml:reuters.com:*:nL8N1TG0QV
    "After  spending  around  four  and  half  years  in 
purdah, an incremental  400 million  pounds of  FCF (free cash
flow) would  allow  Rolls-Royce to  take  a  significant  step 
toward  meeting its  financial  targets," Jefferies analysts
said.
    "That  should  then  mean  Rolls-Royce  can  make  an 
adequate  annual  return  to shareholders through the dividend."
    Danish hearing equipment maker GN Store Nord  GN.CO  was the
top gainer on the STOXX, up 12.2 percent after it upped its 2018
sales and profit forecasts for its headset business.
 urn:newsml:reuters.com:*:nL8N1TG1AQ
    Shares in heavyweight drugmaker GSK  GSK.L  rose 2.3
percent. Investors welcomed news its two-drug treatment for HIV
met its main goal in late stage studies - a boost after
regulators warned of possible birth defects from one of the two
drugs.  urn:newsml:reuters.com:*:nL8N1TG0V4
    On the DAX, Volkswagen  VOWG_p.DE  rose 2.2 percent. It fell
in early trading after the carmaker was fined one billion euros
over diesel emissions cheating.  urn:newsml:reuters.com:*:nL8N1TF5GB 
 ($1 = 0.7482 pounds)

 (Reporting by Danilo Masoni and Helen Reid; Editing by Alison
Williams)
 ((Danilo.Masoni@TR.com; +39-02-66129734; Reuters Messaging:
danilo.masoni.thomsonreuters.com@reuters.net; On Twitter https://twitter.com/damasoni))

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