ECB stimulus hopes push Europe stocks to 3-month high
EUROPEAN INVESTORS STILL MOSTLY FOCUSED ON EXPECTED MOVES FROM DRAGHI
European stocks hovered at a 3-month high yesterday as Eurozone inflation remained barely visible and underlined just why the ECB is set for more stimulus.
However, Wall Street was expected to see a subdued start and the dollar was still recovering from an overnight wobble, though European investors were still mostly focused on today’s expected moves from European Central Bank chief Mario Draghi.
Markets are expecting another salvo of easing measures from Draghi today, including an expansion of its bond buying programme and even higher charges for commercial banks that hoard excess cash.
“It [Eurozone flash HICP data] is not consistent with the trend that the ECB was expecting,” said Ruben Segura-Cayuela, a Eurozone economist at Bank of America Merrill Lynch.
“We are expecting a oneyear extension on QE purchases and quantities to go up to as much as €70 billion [Dh272.3 billion] a month. We also see a cut in the deposit rate, we think 10 basis points, but it could be 20.” The hopes for an early Draghi Christmas present had initially lifted Germany’s DAX, France’s CAC 40 and Spain’s IBEX but all three had run out of steam as the start of US trading approached.
The pan-European FTSEurofirst, however, stayed flush against a 3-month high hit the previous day as London’s FTSE kept it steady with a 0.4 per cent gain It came as weak construction data left the pound near a 7-month low and as British politicians were preparing to vote on whether to join allied bombing of Islamic State targets in Syria.
Threshold
With the euro back on the slide again, the US dollar index pushed back above the 100 threshold and toward the 12year high it had hit in March.
Federal Reserve head Janet Yellen speaks in Washington later and focus will be on what she has to say, with the Fed widely expected to pull the trigger on its first hike in US interest rates in almost a decade on December 16.
The economic data has not been playing ball with the Fed’s policy plans in recent weeks. With a huge consensus now assuming a hike, the sharp downturn in the manufacturing surveys have come alongside weaker retail sales and Chicago PMIs.
“It would be historic if she [Yellen] were to raise rates into a slowdown.” said Didier St George, managing director at fund manager Carmignac. “It would be a concern.”
There was a more positive signal, however, from data showing US private employers had added 217,000 jobs in November, the biggest increase since June.
Four other Fed members aside from Yellen were also due to speak yesterday, with Atlanta Fed President Dennis Lockhart first out the block saying there was a “compelling” case to raise US rates.
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