Europe close: Stocks recover as euro slips on back of more dovish ECB

Germany's Chancellor may want a more 'normal' monetary policy, but according to analysts commenting on the European Central Bank Governing Council's policy meeting on Thursday, she will have to wait.

Following the GC meeting, ECB chief, Mario Draghi, outlined a plethora of uncertainties that were weighing on the economic outlook and said that the balance of risks was now pointing to the downside.

And he wasn't alone in making that prognosis, it was in fact, he said, the unanimous opinion of the council; hence the decision to wait until March to better ascertain how sustained those uncertainties would be.

Commenting on the content of Thursday's GC meeting, economists at Barclays Research said: "We believe there is a monetary policy case for another TLTRO to be announced, most likely in March. On rates, we still believe the Governing Council is pleased with the formulation of forward guidance, and we expect it to be maintained in March, at least until the plethora of (binary) risks are resolved one way or another (trade disputes, Brexit, Italy)."

Against that backdrop, by the end of trading the benchmark Stoxx 600 had recovered to trade higher by 0.22% or 0.78 points to 355.67, alongside an advance of 0.53% or 58.64 points to 11,130.18 for the German Dax and a gain of 0.85% or 164.33 points to 19,564.48 on the FTSE Mibtel.

In parallel, euro/dollar was sharply lower, erasing 0.76% and falling to 1.12964, after most analysts were apparently left expecting that the ECB's now more 'dovish' policy stance would turn into some additional policy accomodation further down the road, most likely in the form of another long-term refinancing operations or TLTRO.

Front month Brent crude oil futures meanwhile were higher by 0.082% at $61.19 a barrel on the ICE.

Underlining the soft economic outlook, especially in the near-term, IHS Markit's closely-followed gauge of euro area manufacturing and services sector activity revealed that growth stopped almost completely at the start of 2019, with France's economy threatening to drop into contraction, alongside a downturn in German manufacturing.

The survey compiler's preliminary Eurozone Purchasing Managers' Index composite output gauge declined from a reading of 51.1 for December to 50.7 in January, hitting a 66-month low in the process.

Economists had in fact been expecting an improvement in the composite index to 51.4.

Elsewhere, Norway's central bank opted to stay put on interest rates, keeping its official short-term rate at 0.75%.