Europe close: Stocks finish higher on hopes of further ECB QE

Stocks in the euro-area finished higher on Thursday as the European Central Bank’s June meeting minutes showed policymakers were ready to provide more stimulus measures to the economy if needed.

Germany’s DAX rose 0.49%, France’s CAC 40 increased 0.80%, Italy’s FTSE MIB grew 0.08% and Spain’s IBEX 35 climbed 1.12% at the close.

The ECB warned at its last meeting that a vote by Britain to leave the EU would have a significant impact on eurozone growth, according the minutes of the 1-2 June meeting. The ECB reiterated that it would use all the tools under its mandate to boost the stagnant recovery and lift prolonged low inflation.

Many economists expect the ECB will expand its quantitative easing programme after the Bank of England suggested it was likely to cut interest rates to address the fallout from Brexit. The BoE is expected to cut interest rates at next Thursday's policy announcement.

“We see (the ECB) upping the monthly pace of its asset purchases (from €80bn to €90bn or €100bn) and perhaps also cutting the deposit rate slightly further into negative territory as soon as its next meeting on 21st July,” said Jennifer McKeown, senior European economist at Capital Economics.

In economic data, German industrial production fell the most in 21 months in May amid a global economic slowdown and political uncertainty in Europe. Production fell 1.3% from the previous month when it increased a revised 0.5%, the Economy Ministry said. Economists had pencilled in zero growth. Year-on-year industrial production dropped 0.4%, compared to expectations for a 1.5% increase and the previous month’s 0.8% rise.

UK industrial production data for May was also better than expected. Output rose 1.4% in May compared with the same month last year, according to initial estimates from the Office for National Statistics, slowing from the revised 2.2% growth in April 2016 but ahead of forecasts for a steeper slowdown to 0.5%. On the month, industrial production fell 0.5% but was ahead of forecasts for a 1.0% fall.

UK manufacturing production increased 1.7% year-on-year but fell 0.5% month-on-month in May, beating forecasts for a 0.6% rise and a 1.2% decline respectively.

In the US, the ADP said private sector employers added 172,000 jobs last month, beating forecasts for a 160,000 increase. May’s employment gains were revised down to 168,000 from 173,000.

The report comes ahead of Friday's non-farm payrolls report, which the Federal Reserve has been monitoring closely as it considers its policy measures.

The minutes of the Fed’s 14-15 June policy meeting on Wednesday revealed a weak May jobs report played a part on the central bank’s decision to keep policy unchanged.

In commodities, oil prices reversed earlier gains as the US Energy Information Administration reported that domestic crude supplies declined by 2.2 million barrels for the week ended 1 July, which was weaker than the American Petroleum Institute’s 6.7 million declines in barrels last week.

Brent crude fell 1.9% to $47.87 per barrel and West Texas Intermediate dropped 1.9% to $46.53 per barrel at 1647 BST.

On the company front, asset managers Aberdeen Asset Management and Henderson rebounded. Aberdeen had cut the value of its UK property fund by 17% while Henderson said it had temporarily suspended trading in its UK commercial property fund.

Marks & Spencer was in the red after reporting a like-for-like drop in clothing and home sales in the 13 weeks to 2 July while food sales fell 0.9%.

Danone shares jumped after saying it will acquire WhiteWave Foods in a deal that values the US organic foods producer at $12.5bn.

Banco Popolare fell after Exane BNP Paribas cut its price target for the stock.