EUROPE MARKETS: European Stocks Leap As ECB Nudges Up Growth View, Euro Slides

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03/08/2018 | 06:31 pm


By Sara Sjolin and Carla Mozee, MarketWatch



Casino shares slide after earnings; Britvic upgraded



European stocks leapt to a one-week high Thursday after the European Central Bank offered a brighter assessment of economic growth in the eurozone, and as the euro retreated from intraday gains.



How did markets perform?



The Stoxx Europe 600 index climbed 1.1% to 376.62, the best close since Feb. 28, FactSet data showed. All sectors rose, led by the consumer-goods group.



France's CAC 40 index surged 1.3% to 5,254.10, its highest close since Feb. 7. Germany's DAX 30 index finished up 0.9% at 12,355.57.



Italy's FTSE MIB tacked on 1.2% to 22,731.10, and the U.K.'s FTSE 100 index rose 0.6% to end at 7,203.24.



The euro dropped to $1.2314 from $1.2411 late Wednesday in New York.



The yield on the 10-year German bund fell 3 basis points to 0.625%, according to Tradeweb, as prices rose.



What was driving the market?



Stocks ran higher during afternoon trade as investors yanked the euro from its intraday high of $1.2447 against the U.S. dollar. Shares of European exporters can be hurt when the euro rises, as euro strength can reduce revenue made overseas by such companies.



The euro retreated as ECB President Mario Draghi, at a Frankfurt press conference, emphasized more dovish elements of the bank's monetary policy statement issued Thursday, including a commitment to maintaining rates at present and low levels if warranted. The euro's fall paved the way for stocks to scramble higher.



The euro had earlier climbed, and stocks dropped, after the ECB gave up its pledge to expand or extend quantitative easing if the economic outlook deteriorated. The bank dropped the line that it would stand "ready to increase the asset purchase programme (APP) in terms of size and/or duration," if the economic outlook became "less favorable."



(https://twitter.com/RANsquawk/status/971729162053586945)



Traders were waiting to see if the rate setters would remove that particular bit, as it could indicate the end of QE is moving closer.



Draghi said economic growth in the eurozone is improving faster than the bank had anticipated, leading it to nudge up its 2018 growth forecast to 2.4% from 2.3%. It slightly reduced its 2019 inflation forecast to 1.7% from 1.9%.



The ECB left its refinancing rate at 0% . The ECB also reiterated that the current EUR30-billion-a-month stimulus program will "run until the end of September 2018, or beyond, if necessary."



European stocks had opened in positive territory as tensions over planned U.S. tariffs on steel and aluminum imports eased after the White House indicated that major trading partners Canada and Mexico could be exempt. U.S. President Donald Trump is expected to sign the tariff order on Thursday, with an announcement planned for 3:30 p.m. Eastern Time, according to media reports .



What strategists are saying



"Today's marginally hawkish concession from the ECB has been overshadowed by a marginally negative revision to their inflation forecasts today, with the DAX hitting the highest level in a week in response," Joshua Mahony, a market analyst at IG, wrote in emailed comments.



"Talk of greater available slack and the clear easing of inflation pressures has taken the pressure off the committee to act, and with a typically dovish Mario Draghi allowed to maintain an accommodative stance going forward, today is clearly a case of taking with one hand and giving with the other," he wrote.



Which stocks were in focus?



Actividades de Construccion y Servicios SA (>> company sheet) rallied 7.8% after Atlantia said it and ACS have discussed making a joint offer for Spanish infrastructure firm Abertis Infraestructuras , confirming Spanish media reports.



JCDecaux slid 3% after the outdoor advertising company said profit slumped 14% on 2017 .



Casino Guichard-Perrachon fell 3.7% after the French retailer posted a sharp drop in 2017 profit .



Shares of Hugo Boss lost 6.9% even after the German fashion company said it would raise its 2017 dividend after net profit rose in the full year.



Britvic PLC jumped 6.2% after Morgan Stanley upgraded the soft drinks maker's rating to overweight from equalweight. "After a material pull-back YTD, Britvic's current share price offers an attractive entry point," said analyst Richard Felton in a research note.



What's new in economics?



German manufacturing orders fell more than expected in January, dropping 3.9%, compared with forecasts of a 1.5% decline.



In France, the Bank of France said the country's economy is likely to expand by 0.4% in the first quarter , down from 0.6% in the fourth quarter of 2017.





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