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London - A key pan-European index posted its biggest weekly gain so far this on Friday after the Bank of Japan surprised global financial markets by ramping up its massive stimulus spending.
The FTSEurofirst 300 index of top European shares closed 1.8% higher at 1 351.96 points, taking its weekly gain to 3%, the largest since December 2013.
The Bank of Japan's decision to buy more assets helped ease concerns about the end of quantitative easing in the United States and the European Central Bank's reluctance so far to engage in large-scale bond buying despite sluggish inflation.
"There's euphoria in markets following the BoJ news. It will help offset the end of the Fed's QE, and also shows how determined central banks are in their fight against deflation," Saxo Bank trader Pierre Martin said.
French auto maker Renault, which has a partnership with Japan's Nissan, rose 3.5% as a slump in the yen made Japanese exports more attractive.
Despite a 5.6% bounce over the past two weeks, the FTSEurofirst 300 still suffered a 2% loss in October, its steepest monthly drop in 16 months.
An economic slowdown in Europe and some emerging markets as well as the end of the Federal Reserve's six-year stimulus programme have hit equity markets in the past month.
Expectations of more monetary stimulus from other central banks - such as the Bank of Japan's move - was attracting buyers, however.
"We feel there will be more of this type of intervention to try to bolster growth across the world," said David Coombs, head of multi-manager at Rathbone Brothers, which manages assets worth £26.6bn.
He has been increasing his positions in German and UK shares during the recent selloff, betting they will be supported by low interest rates globally.
"It's not a great reason to hold equities but it's right for the world we're in," Coombs said.
Banks rally
Shares in banks led gains, with the STOXX Europe 600 banking index up 2.7%.
Shares in Barclays and Royal Bank of Scotland rose by 8.2% and 6.8%, respectively, after Britain's financial regulator said banks had until 2019 to hit a new target that will cap the size of their businesses at about 20 times their equity.
France's No. 1 bank BNP Paribas rose 3.5% after it posted better-than-expected results, as gains in fixed income trading and international retail offset a lacklustre economic environment in its core European markets.
Spain's Banco Popular fell 5.7%, however, as it set aside twice as much in charges against bad debts in the third quarter than a year ago, a sign the bank is still dealing with fallout from the country's financial crisis.
Finnish winter tyre specialist Nokian Renkaat dropped 8.3% after warning its full-year operating profit could be 22% lower than in the previous year due to falling sales in Russia.
So far in Europe's earnings season, about 60% of companies have exceeded analyst estimates, well above the average seen since 2011 of 48% of European companies beating the forecasts, according to Thomson Reuters.
