Eurozone growth stronger than previous estimated; bank shares pare losses
European stocks gained ground on Thursday, staying higher after the European Central Bank kept its key interest rates on hold and reiterated its commitment to its bond-buying program.
The ECB left the rate on the main refinancing operations at 0%, while the rate on deposits left overnight at the bank was maintained at minus 0.4% and the rate on the marginal lending facility was left at 0.25%.
Additionally, the ECB repeated its plan to spend 60 billion euros a month buying bonds through the end of December. It did say that if the eurozone’s economic outlook deteriorated, it could increase the size of the program.
Follow the ECB on the live blog:Is a strong euro making Mario Draghi miserable? (http://blogs.marketwatch.com/thetell/2017/09/07/ecb-live-blog-is-strong-euro-making-mario-draghi-miserable/)
The Stoxx Europe 600 index rose 0.4% to 375.40. 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.
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The euro (http://www.marketwatch.com/story/euro-trims-gains-after-ecb-keeps-interest-rates-qe-unchanged-2017-09-07) slightly trimmed gains to buy $1.1971, compared with $1.1981 ahead of the decision, but up from $1.1917 late Wednesday in New York.
Attention now turns to ECB President Mario Draghi’s press conference at 1:30 p.m. London time, or 8:30 a.m. Eastern Time. The key question for traders is what will happen to the QE program when it expires at the end of the year and when the ECB will start tapering the bond purchases.
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)
“Whether and how much ECB president Draghi will talk about tapering in his introductory statement and the Q&A session will highly depend on the weight the ECB attaches to the euro exchange rate,” said Carsten Brzeski, chief economist at ING, in a note.
“Giving no hint of and at the tapering game plan at all will keep markets at unease and will do little to calm speculations. At the same time, talking down the euro would also only work if the ECB was to give signals that tapering could be postponed,” he added.
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 0.7% to 5,138.53.
(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 1 basis point to 0.345%. Yields rise when prices decline.
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 1.5%, BMW AG (BMW.XE) gained 1.6%, and Volkswagen AG (VOW.XE) (VOW.XE) picked up 1.3%. 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 3.6% and 2.7%, 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 0.4% to 7,386.58. Spain’s IBEX 35 put on 0.2%, and Italy’s FTSE MIB gained 0.1%.
(END) Dow Jones Newswires
September 07, 2017 08:22 ET (12:22 GMT)