Eurozone growth stronger than previous estimated; bank shares pare losses
European stocks gained ground on Thursday, perking up after eurozone economic growth figures were revised higher, with the update coming just before investors find out whether the European Central Bank is ready to wind down its bond-buying program.
The Stoxx Europe 600 index rose 0.2% to 374.63, with the move aided by a turn higher in shares of financial and industrial stocks, leaving only the telecom sector slightly in the red. On Wednesday, the index closed up 0.1% (http://www.marketwatch.com/story/european-stocks-head-for-3rd-straight-loss-as-irma-weighs-on-insurers-2017-09-06), snapping a two-day losing streak.
German and French equities extended gains Thursday after Eurostat data showed the eurozone economy grew more quickly over the 12 months through June (http://www.marketwatch.com/story/eurozone-economic-growth-stronger-than-seen-2017-09-07) than previously estimated. Eurostat now reports the economy was 2.3% larger in the three months to June than it was in the year-ago period. That would be fastest rate of growth recorded since the first three months of 2011.
In Frankfurt, the DAX 30 index climbed 1% to 12,335.13, and in Paris, the CAC 40 index gained 0.6% to 5,131.75.
For the ECB, investors are focusing on whether the central bank will start tapering its EUR60-billion-a-month bond-buying program, or hold off for fear of denting the eurozone’s economic recovery.
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Read:Here’s how the ECB got ‘stuck in the euro trap’ on its way to winding down QE (http://www.marketwatch.com/story/heres-how-the-ecb-got-stuck-in-the-euro-trapon-its-way-to-winding-down-qe-2017-09-05)
The ECB’s rate decision announcement is scheduled for 12:45 p.m. London time, or 7:45 a.m. Eastern Time, followed by a press conference with ECB President Mario Draghi at 1:30 p.m. London time.
The ECB has signaled that it’s concerned about the strength of the euro , which on Thursday was changing hands at $1.1975, up from $1.1917 late Wednesday in New York. But on Wednesday, Deutsche Bank AG’s Chief Executive John Cryan urged the ECB to begin the process of winding down (http://www.marketwatch.com/story/deutsche-bank-ceo-urges-ecb-to-end-cheap-money-era-2017-09-06) its “cheap money” policy, regardless of the strength of the euro.
“Investors are convinced that the ECB will begin tapering QE, and it’s all about the announcement date and size of the cuts,” said Hussein Sayed, chief market strategist at FXTM.
“If the ECB decided to surprise and cut asset purchases by EUR10 billion-EUR20 billion euros starting January, the euro will likely revisit the $1.20 level and possibly break above August highs,” he said.
“Postponing the decision will only have a short-term negative impact, and I believe this will create another opportunity to buy the dips towards $1.17-1.18 levels.”
(http://www.marketwatch.com/story/heres-how-the-ecb-got-stuck-in-the-euro-trapon-its-way-to-winding-down-qe-2017-09-05)The yield on Germany’s 10-year government bund rose 2 basis points to 0.358%. Yields rise when prices decline.
Lenders down: Bank shares came off session lows after the upwardly revised growth figures, leading the Stoxx Europe 600 Bank Index to pare its loss to 0.1%. Within it, shares of Deutsche Bank AG (DBK.XE) turned up 0.6%, Societe Generale SA (GLE.FR) flipped up 0.3% and Banco Santander SA (SAN) gained 0.3%.
Bank stocks have struggled recently on the widely held expectation that the ECB will leave its key interest rates unchanged. Higher interest rates could bolster net interest margin at banks.
Car makers revved: Auto maker stocks continued to push higher after Barclays and Goldman Sachs upgraded ratings in the sector on Wednesday.
Shares of Daimler AG (DAI.XE) rose 1.9%, BMW AG (BMW.XE) gained 1.8%, and Volkswagen AG (VOW.XE) (VOW.XE) picked up 1.2%. Fiat Chrysler Automobiles NV (FCA.MI) (FCA.MI) reversed losses and rose 0.3%.
Stock movers: RWE AG (RWE.XE) and E.On SE (EONGY) climbed 3.8% and 2.5%, respectively, after Deutsche Bank raised price targets on those energy companies, according to Dow Jones Newswires.
Royal Bank of Scotland (RBS.LN) fell 1.1% as U.K. lawmakers called on the Financial Conduct Authority to publish its report on potential missteps by the bank’s business restructuring unit.
Country indexes: In London, the FTSE 100 rose 0.2% to 7,369.13. Spain’s IBEX 35 put on 0.3%, but Italy’s FTSE MIB fell 0.1% to 21,789.17.
(END) Dow Jones Newswires
September 07, 2017 06:24 ET (10:24 GMT)