Europe close: Stocks bounce amid dovish ECB
European stocks bounced back on Thursday as investors exercised caution ahead of the Trump-Xi summit in the US and mulled 'dovish' comments from European Central Bank chief Mario Draghi.
By the closing bell, the benchmark Stoxx Europe 600 index was edging higher by 0.18% to 380.77 and Germany’s DAX was up 0.11% to 12,230.89, but France’s CAC was 0.58% firmer at 5,121.44.
Meanwhile, Brent crude oil futures were up 1.02% to $54.92 per barrel and West Texas Intermediate rose 1.1% to $51.71.
The euro fell to a three-week low against the dollar after the ECB's chief economist, Peter Praet, ruled out a hike in the deposit rate hike until "well after" asset purchases had been completely wound-up. The single currency declined to 1.0649 and was off by 0.18%.
Appearing to back up his chef economist, speaking in Frankfurt Draghi told an audience it was "too soon to declare success on inflation", adding that there was scant evidence inflation was headed towards the ECB's goal in a sustained manner.
The minutes of the ECB's last policy meeting published later in the day appeared to confirm the view that a depo rate hike was not yet in the pipeline, Capital Economics and IHS Markit said.
Nevertheless, not all observers were fully convinced, with economists at Barclays telling clients that increasing divergences on the outlook for inflation among Governing Council members as seen in the minutes meant the ECB might 'compromise' by allowing the so-called depo-rate to rise modestly in 2018, earlier than the 2019 date some of their peers were penciling in.
"We therefore continue to expect a rebalancing of the forward guidance to be announced at the June meeting (or even possibly in April), and we forecast a reduction in the pace of the APP in 2018, together with a very gradual and modest increase in the depo rate (20bps altogether in 2018)," economists at Barclays said.
Market participants were also looking ahead to US president Donald Trump’s meeting with Chinese counterpart Xi Jinping at Trump’s Mar-a-Lago resort in Florida for a two-day summit.
On the data front, German factory orders rose 3.4% in February, going a long way to unwinding January’s sharp 6.8% drop and below the 4% consensus forecasts.The year-over-year rate increased to 4.6% from 0.0% in January.
Markit’s Eurozone retail purchasing managers' index fell to 49.5 in March, from 49.9 in February. Readings of 50 and above indicate expansion while those below denote contraction.
In corporate news, Freenet was down 2.28% after Berenberg downgraded the German mobile phone operator to ‘sell’ from ‘hold’.
French and German insurers were initially sent lower after European regulators said they would lower the interest rate they use to calculate their liabilities, which may entail higher capital requirements for some of them.
Yet by the end of the day shares in AXA had recovered to trade 0.55%, Coface gained 0.55%, and Allianz advanced 0.66%.