Europe Stocks Rise to Five-Year High as Fed Resists Taper

European stocks rose to the highest level in more than five years as the Federal Reserve unexpectedly decided against slowing the pace of its monthly bond purchases.

UniCredit SpA and Standard Chartered Plc climbed more than 2 percent each as a gauge of lenders advanced. Randgold Resources Ltd. and Polymetal International Plc jumped more than 8 percent as the price of gold rose. Cie. Financiere Richemont SA (CFR) and Swatch Group AG advanced more than 1 percent as a report showed Swiss watch exports increased last month.

The Stoxx Europe 600 Index rallied 0.7 percent to 315.5, the highest level since June 2008, at 2:44 p.m. in London. The equity benchmark has gained 6.1 percent so far this month, extending its advance this year to 13 percent, as central banks around the world pledged to maintain stimulus measures to support the global economy.

"I'm a bit surprised by the Fed's decision to postpone tapering," said Pierre Mouton, who helps oversee $6 billion as a portfolio manager at Notz, Stucki & Cie. in Geneva. "It's possible that the Fed is afraid of seeing the housing recovery jeopardized. Investors were pricing in a taper, hence the upside reaction in markets today. It is not surprising, as investors have become addicted to liquidity."

The volume of shares changing hands in Stoxx 600-listed companies was 40 percent greater than the 30-day average, data compiled by Bloomberg show. The VStoxx Index, a measure of expected volatility in euro-area stocks, slid 6.1 percent to its lowest level in a month.

Fed Decision

The Fed yesterday refrained from reducing its $85 billion of monthly bond purchases, saying it needs to see more indications that the U.S. economy is improving sustainably. Economists surveyed by Bloomberg before the decision had predicted that the central bank would start tapering stimulus measures this month.

"Conditions in the job market today are still far from what all of us would like to see," Fed Chairman Ben S. Bernanke said at a press conference in Washington after European markets closed. "The committee has concern that rapid tightening of financial conditions in recent months would have the effect of slowing growth."

Bernanke reiterated that a decision on slowing the pace of asset purchases would depend on economic data, and that the Fed has no set timetable. The central bank repeated its guidance that its target interest rate will remain low for at least as long as unemployment exceeds 6.5 percent, and the outlook for inflation is no higher than 2.5 percent.

National benchmark indexes gained in 16 of the 18 western European markets today. Germany's DAX rose 0.7 percent, extending a record. The U.K.'s FTSE 100 added 1.3 percent and France's CAC 40 climbed 0.8 percent.

Banks, Miners

UniCredit, Italy's biggest bank, climbed 2.7 percent to 4.94 euros. Standard Chartered added 4 percent to 1,574 pence. A gauge of European lenders increased 1.2 percent, extending its rally since a June 24 low to 21 percent.

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Randgold jumped 8.5 percent to 4,857 pence as gold extended yesterday's biggest gain in more than 15 months. Polymetal surged 11 percent to 723 pence, the largest advance since July 11. Fresnillo Plc, which produces gold and silver in Mexico, rallied 7 percent to 1,079 pence.

A gauge of commodity producers posted the best performance of the 19 industry groups on the Stoxx 600.

Richemont, owner of the Cartier brand, climbed 2.4 percent to 94.95 Swiss francs as a report showed watch exports rose 0.5 percent in August from a year earlier. Swatch, the biggest maker of Swiss watches, gained 1.7 percent to 596.50 francs.

Scania Advances

Scania AB (SCVB) gained 3.3 percent to 144 kronor after saying European demand isn't showing "seasonal weakness" in the current quarter. The Swedish truckmaker controlled by Volkswagen AG also reiterated its worldwide target of delivering 120,000 vehicles a year by 2020.

European Aeronautic, Defence & Space Co. (EAD) rose 1.8 percent to 47.28 euros, the highest price since it sold shares to the public in 2000. Deutsche Lufthansa AG split an order for 59 wide-body aircraft valued at $19 billion between EADS unit Airbus SAS and Boeing Co.

K+S AG, a German potash producer, dropped 4.6 percent to 20.44 euros. Potash Corp. of Saskatchewan Inc. said global volumes of the crop nutrient have been low, following OAO Uralkali's withdrawal from a joint venture in Belarus.

"In the offshore market, volumes have been essentially paralyzed," Potash Chief Financial Officer Wayne Brownlee said at an investor conference in New York.

Havas SA (HAV) lost 1.6 percent to 5.78 euros. Barclays Plc downgraded the French advertising company to equal weight, similar to neutral, from overweight, citing the need to "pause for breath" after its strong performance over the past three months. Havas climbed 28 percent from a June 24 low through yesterday's close.