European stocks climb as Fed boosts bank sector

Europe's stock markets mostly advanced Thursday with solid gains across the banking sector after the US Federal Reserve hiked interest rates as expected -- and signalled three more rises next year.

The news sent the dollar spiking against rival currencies as the hawkish prospect of more rate hikes cemented support for the greenback.

The yield on 10-year US Treasury bonds hit the highest level since the summer of 2014, having already soared in the wake of Donald Trump's surprise presidential election victory.

In Europe, bank share prices shot higher on expectations of swelling profits, dealers said.

"The main thing for Europe is the banks," ETX Capital analyst Neil Wilson told AFP.

"Banking stocks (are) driving European bourses higher after the Fed hiked rates and yields pushed higher.

"Banks are really enjoying this Trump bump and the Fed's hawkish pivot."

London shares however dipped 0.2 percent ahead of an interest rate decision from the Bank of England, which is expected to hold rates at 0.25 percent at 1200 GMT.

Traders brushed off news of a small increase in British retail sales for November thanks to Black Friday discounts.

However, there were broad gains in the eurozone, with Frankfurt stocks up 0.6 percent and Paris adding 0.7 percent, compared with Wednesday's closing levels.

Frankfurt's top gainer Deutsche Bank jumped 3.7 percent to 17.88 euros.

The biggest winner in Paris was lender BNP Paribas, whose stock was up 3.45 percent at 60.61 euros. 

Rivals Societe Generale and Credit Agricole added 3.22 percent and 2.34 percent, to stand at 47.42 euros and 11.81 euros respectively.

- 'Light at end of tunnel' -

"There could be no better news for the banking sector than higher rates," said London Capital Group analyst Ipek Ozkardeskaya, noting that the sector had struggled for years with the low global interest rate environment.

"They have seen their revenues squeezed (and) they had to increase their risk taking in order to secure tiny returns for their clients," she told AFP.

"Now, finally, they can see the light at the end of the tunnel.

"Higher rates means higher margins, improved organic revenues, lower pressure. This explains the cheerfulness in the banking sector."

However, most Asian markets tumbled after the Fed announcement.

Investors were sent scurrying on the prospect of tighter borrowing costs as the Federal Reserve positions itself for an expected jump in inflation.

The Fed news sent the dollar soaring well past 117 yen and its highest level since February, while it also bulldozed other currencies, particularly higher-yielding, riskier, units and those of emerging market nations.

In her post-announcement conference, Yellen said the rise was a reflection of "the confidence we have in the progress that the economy has made and our judgment that that progress will continue".

However, the upbeat outlook for the key driver of global growth was unable to comfort Asian traders worried about a flood of cash out of their own economies as dealers look for better returns in the United States.

- Key figures around 1045 GMT -

London - FTSE 100: DOWN 0.1 percent at 6,942.20 points

Frankfurt - DAX 30: UP 0.6 percent at 11,315

Paris - CAC 40: UP 0.7 percent at 4,804.10

EURO STOXX 50: UP 0.8 percent at 3,237.20

Tokyo - Nikkei 225: UP 0.1 percent at 19,273.79 (close)

Hong Kong - Hang Seng: DOWN 1.8 percent at 22,059.40 (close)

Shanghai - Composite: DOWN 0.7 percent at 3,117.68 (close)

New York - Dow: DOWN 0.6 percent at 19,792.53 (close)

Euro/dollar: DOWN at $1.0489 from $1.0533 Wednesday

Dollar/yen: UP at 117.70 yen from 117.08 yen 

Pound/dollar: DOWN at $1.2546 from $1.2559

Oil - West Texas Intermediate: UP 26 cents at $51.30 per barrel

Oil - Brent North Sea: UP 52 cents at $54.42