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ECB Booster Shot Drives European Markets Higher


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By Administrator_India

Capital Sands

European stock markets pushed higher Friday, helped by more support from the European Central Bank which has boosted hopes of a relatively speedy recovery in the region.

At 3:55 AM ET (0705 GMT), the DAX in Germany traded 2.3% higher, France’s CAC 40 rose 2.4%, while the U.K.’s FTSE index was up 1.3%.

These indexes have posted strong gains this week, with the DAX up 9.7%, the CAC 40 up 9.4%, and the FTSE 100 underperforming,  rising just 5.7%.

The ECB offered up, on Thursday, another massive jolt of stimulus for the region, practically doubling its planned bond purchases to 1.35 trillion euros ($1.5 trillion). Sovereign bond yield spreads narrowed to their tightest since March in reaction.

This “decision should dent any future speculation about whether or not the ECB is willing to play its role of lender of last resort for the eurozone,” said analysts at ING, in a research note.

And it’s likely this won’t be the last of the central bank’s largesse.

“We judge that a further increase in the PEPP [Pandemic Emergency Purchase Program] envelope will likely follow later this year. This reflects the deep recession in the economy and the significant disinflation it will trigger over coming years,” said analysts at ABN Amro, in a note to clients.

The banking sector led the way, with Commerzbank up 6.5%, Societe Generale gaining 5.8% and BNP Paribas  up 4.8%. Banks in the southern periphery of the euro zone fared even better, as the ECB’s action dovetailed with increased optimism as regards summer tourist flows.

That optimism drove IAG shares up 12% in Madrid, and Air France-KLM and Norwegian Air Shuttle all posting gains of over 10%. Lufthansa shares rose 7.2% despite the news that it will be dropped from the DAX as of June 22.

The focus later Friday will switch to the release of the U.S. employment report, at 8:30 AM ET (12:30 GMT).

The unemployment rate for May is projected to rise to 19.8% from 14.7% in April, while nonfarm payrolls are estimated to have dropped another 8 million in the month.

Oil prices pushed higher Friday, amid reports a video conference of a group of leading oil producers, known as OPEC+, would be held on Saturday.

At 4 AM ET, U.S. crude futures traded 1.5% higher at $37.98 a barrel. The international benchmark Brent contract rose 2.1% to $40.84.

Elsewhere, gold futures fell 0.9% to $1,711.70/oz, while EUR/USD traded at 1.1349, up 0.1%.


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