By Jaya Matta and Nina Bains
European stock markets maintained a strong tone Thursday after European Central Bank President Mario Draghi reiterated
that the central bank won’t raise rates for the foreseeable future, despite the recent run of stronger-than-expected
economic data within the region.
At the press conference following the monthly policy-setting meeting of the ECB’s governing council, Mr. Draghi
repeated the guidance that he had given for the first time last month, saying that official interest rates will remain
at or below their present levels “for an extended period of time.”
“The language is relatively unchanged apart from the acknowledgement of tentative signs of stabilization. The stance
remains dovish,” said Vasileios Gkionakis at UniCredit SpA.
At 1350 GMT, the DAX traded 1.5% higher, the FTSE 100 up 0.7% and the CAC-40 gained 1%. Elsewhere, the euro briefly
slipped below $1.32, but quickly recouped these losses and was last seen near pre-press conference levels, around the $
1.33 level. In addition, the German bund contract pared early gains, but this may have more to do with the latest
jobless claims figure in the U.S., which came in a touch stronger than expected.
“Draghi doesn’t provide any firm timeframe for the current guidance, however, it is clear that no changes in the
guidance will be made until inflation remains below 2%,” said Annalisa Piazza strategist at Newedge.
Earlier, the European Central Bank left its key interest rates unchanged again, maintaining its accommodative stance
amid some signs of economic recovery in the euro zone.
The Bank of England also kept its benchmark interest rate and bond-buying program unchanged and opted not to issue a
statement, despite having taken the unusual step to do so after the July meeting.
In a policy review Wednesday, the central bank is expected to be more explicit about the conditions under which policy
would be tightened, in a process known as forward guidance.
U.K. stocks briefly turned negative, government bonds slipped, but sterling rallied against the dollar following the
announcement.
Adding to the upbeat tone in markets, data showed the number of U.S. workers seeking new unemployment benefits fell to
a five-year low last week, a new sign of a modestly improving labor market.
More generally in Europe, gains were underpinned by strength in the mining sector after manufacturing data from the
euro zone and China beat expectations.
The Stoxx 600 index for basic resources–a sector that is highly dependent on demand from China–rose 2.1%
U.K. manufacturing data were equally upbeat and also helped sterling to move higher, as the manufacturing sector
expanded at the fastest pace in over two years.
Corporate news in Europe was mixed but banks had a strong showing.
Societe Generale SA shares rallied as second-quarter net profit more than doubled from a year ago.
Lloyds Banking Group PLC shares soared after the bank posted strong first-half profits and reported it is making
faster-than-expected progress on shoring up capital.
Shares in Royal Bank of Scotland rose as the bank was said to be eyeing Ross McEwan, the head of its retail bank, to
replace Stephen Hester as chief executive, according to people familiar with the matter.
On the downside, shares in Royal Dutch Shell PLC slumped after the oil and gas giant posted a 60% fall in profit for
the second quarter, while Sanofi fell after the French drug maker lowered its earnings guidance for 2013.
Write to Jaya Matta at jaya.matta@dowjones.com
(END) Dow Jones Newswires 08-01-131022ET Copyright (c) 2013 Dow Jones & Company, Inc.
Source Article from http://www.nasdaq.com/article/european-stocks-strong-draghi-maintains-dovish-stance-20130801-01080
