LONDON -- European equities have been seeing a strong rally Friday, boosted by yesterday's announcement by the U.S. Federal Reserve that it would start a third round of asset purchase -- the so-called "QE3" -- with an open-ender pledge to pump $40 billion per month into the economy. Combined with the ongoing Operation Twist, this means until the end of the year the Fed will buy a total of $85 billion of assets a month.
As expected, U.S. retail sales and inflation data did little to shock the markets before the Wall Street open, and in Europe, the higher-beta peripheral countries have been seeing the greatest benefit, with the Spanish IBEX (INDEX: ^IBEX) up 2.3%.
As always, the following price moves are based on this morning's European trading.
The announcement by the Fed has had a broad sweeping impact across countries and industries today, with financial stocks and raw materials seeing some of the greatest strength. This includes Dutch lender ING Groep (NYSE:ING), which is up almost 4% today after the parliamentary elections in the country saw Liberal Prime Minister Mark Rutte re-elected, offering the best hope for "business as usual."
With the potential growth implications of QE3, commodity prices have been climbing throughout the session on hopes that demand will increase for raw materials. As a result, mining and energy stocks have been seeing strong demand, the classic proxy relationship leading to an influx from investors. This includes the steelmaking giant ArcelorMittal (NYSE:MT), which is up 8.3% as concerns over increased prices for iron ore -- a key ingredient in steel production -- are offset by hopes of growth demand for its products themselves.
In a somewhat paradoxical move, gold prices have been rallying today in line with other commodities as reduced demand for the economic safe haven has been countered by concerns that QE3 will result in increased inflationary pressure. In addition, the yellow metal has been benefiting from a slide in the U.S. dollar as the asset-purchasing weakens the strength of the greenback; the move is seen as effectively "printing money." With this, gold producers have been seeing similar gains to other miners, with Randgold Resources (NASDAQ:GOLD) up 6% in London.
On a more negative note, one of the few companies seeing a negative performance on the continent today is GlaxoSmithKline (NYSE:GSK), down almost 2% after a report by The New England Journal of Medicine revealed that a whooping-cough vaccine sold by the company becomes less effective over time. The study showed that the vaccine, thought to fully inoculate a child, became less effective as subsequent doses were given each year, with children having a 42% increased risk of contracting whooping cough after receiving their fifth dose.
As always, this morning's European news saw some winners and losers -- and perhaps some European buying opportunities. Indeed, legendary investor Warren Buffett has recently spent more than $1 billion buying the stock of a prominent European large cap.
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