European stocks marked a new record closing high on Wednesday, as European Central Bank chief Mario Draghi said the bank’s massive bond-buying program is rolling along “smoothly” and conditions in the eurozone are showing improvement.
The Stoxx Europe 600 SXXP, +0.57% climbed 0.6% to 414.06, led by the oil and gas SXEP, +2.01% consumer goods and industrial sectors.
The pan-European benchmark finished above the record close of 413.63 reached on Monday, with analysts saying equities have benefited from the ECB’s €1.1 billion bond-purchasing program, or so-called quantitative easing, launched in March. The program is targeted toward boosting inflation and reviving economic growth in the eurozone.
At its policy meeting Wednesday, the ECB left interest rates unchanged, as expected.
During his afternoon press conference, which was briefly interrupted by a confetti-throwing protester, Draghi said the bank has seen borrowing conditions in the eurozone improve, and that the ECB’s measures are having an impact on the real economy.
“In essence, Draghi ‘stuck to the script,’ shooting down any suggestion that ECB was planning on winding down its QE program prior to the promised 18 months…or imminently planning on expanding the program,” said Matt Weller, senior technical analyst at Forex.com, in a note. “Beyond the early protest, the press conference passed with minimal drama.”
Euro and bonds: The euro EURUSD, +0.30% traded around $1.06, dipping below that level during Draghi’s press conference. It briefly recovered ground following a weaker-than-expected reading on U.S. industrial production in March. However, the shared currency was pushed back to $1.0591 as a fall in yields across European bonds showed signs of picking up pace Wednesday afternoon.
The yield on Germany’s 10-year TMBMKDE-10Y, -23.37% bond fell 3 basis points to 0.10% and the 30-year German bund TMBMKDE-30Y, -9.16% was off 5 basis points at 0.49% after hitting a record-low 0.54% earlier. The yield on 10-year Spanish debt TMBMKES-10Y, -2.45% was 1.26%, down 2 basis points. Yields and prices move inversely.
On the country indexes, Germany’s DAX 30 DAX, +0.03% pared its gain to nearly 4 points at 12,231.34. The U.K.’s FTSE 100 UKX, +0.30% rose 0.3% to 7,096.78, its best close on record, with gains for apparel retailers Burberry Group BRBY, +2.52% BURBY, +2.84% and Next PLC NXT, +2.46%
Tech stocks lagged the broader European market, in part as ASML Holding NV ASML, -2.82% ASML, -3.37% fell 2.8%. The Dutch semiconductor-equipment maker’s second-quarter sales outlook of €1.6 billion was short of the €1.64 billion consensus estimate from Thomson Reuters.
Greece: The Athex Composite GD, -1.94% fell 1.9% to 743.95, weighed down by worries about Greece’s cash crunch and the country’s future in the eurozone. Negotiations between Greece and its international creditors are moving very slowly, a senior European Union official said.
The ECB on Tuesday raised the amount of money Greek banks can borrow under an emergency-lending program to €74 billion ($78.9 billion) from €73.2 billion the previous week.
The emergency-lending program for Greek banks “is the only thing that is preventing capital controls being imposed,” said Angus Campbell, senior analyst at FxPro, in a note early Wednesday.
Alcatel: In Paris, the CAC 40 PX1, +0.70% tacked on 0.7% to 5,254.35. But shares of Alcatel-Lucent SA ALU, -15.51% ALU, -19.07% were driven 15.5% lower after Nokia Corp. NOK1V, -1.47% NOK, -2.76% agreed to buy the French telecommunications-equipment maker in an all-stock deal that values Alcatel at €15.6 billion ($16.6 billion). Alcatel shares had climbed 16% on Tuesday after Nokia confirmed talks about a tie-up were taking place.
The [b]id on Alcatel-Lucent is long-term strategically correct, but highly risky. We are hesitant to its potential for value creation, the true picture will only emerge in a couple of years,” wrote Swedbank in an note. With shares of Alcatel dropping “we can conclude they anticipated a higher bid.”
Nokia shares turned lower, by 1.5%.
Source: MarketWatch
