Banks lead rebound in European stocks, trimming weekly decline
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.