Banks lead re­bound in Euro­pean stocks, trim­ming weekly de­cline

The Pak Banker - - FRONT PAGE -

PARIS: Traders re­assess­ing Euro­pean Cen­tral Bank stim­u­lus sent the re­gion's eq­ui­ties higher, eras­ing losses that came af­ter Pres­i­dent Mario Draghi sig­naled the end of in­ter­est-rate cuts. The Stoxx Europe 600 In­dex re­bounded 1.9 per­cent at 9:49 a.m. in Lon­don, boosted by gains in lenders and au­tomak­ers as the euro weak­ened. On Thurs­day, af­ter an ini­tial surge when the ECB an­nounced it low­ered its key in­ter­est rates and ex­panded its bond­buy­ing pro­gram, the gauge erased all of its in­crease when Draghi said he didn't an­tic­i­pate fur­ther rate cuts.

"Yes­ter­day's moves were far too ex­treme," said Teis Knuth­sen, chief in­vest­ment of­fi­cer at Saxo Bank A/S's pri­vate­bank­ing unit in Hellerup, Den­mark. "Draghi made the mis­take of es­sen­tially say­ing that the ECB was done with stim­u­lus, and the mar­ket over­re­acted to this. At the end of the day, the ECB de­liv­ered more than ex­pected and is pump­ing a lot of money into the sys­tem. A few years ago this would have marked the start of a sig­nif­i­cant rally, but now there seems to be a wide­spread fa­tigue with mon­e­tary pol­icy." De­spite to­day's ad­vances, Euro­pean eq­ui­ties are head­ing for their first weekly drop in four, with the Stoxx 600 down 0.6 per­cent. Com­mod­ity pro­duc­ers, au­tomak­ers and banks - - the most bat­tered in the re­cent sell­off -- had led a 13 per­cent re­bound from Fe­bru­ary's low through a five-week high on March 4. As of yes­ter­day, the in­dex traded at 14.6 times es­ti­mated earn­ings, still far below the 16.7 mul­ti­ple reached last April.

Stock in­vestors have had to deal with in­creased volatil­ity this year, and Thurs­day's mar­ket re­ac­tion ex­em­pli­fies a trend that's been in­ten­si­fy­ing in re­cent months: cen­tral banks are in­creas­ingly pow­er­less when it comes to calm­ing mar­kets. The Euro Stoxx 50 In­dex of the big­gest euro-area com­pa­nies moved more than 5 per­cent in­tra­day, its wildest swings since Au­gust, and the most on an ECB day since 2011.

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