Register for Digital Look

Europe close: Stocks add to gains as ECB, Fed broaden commitment

By Alexander Bueso

Date: Thursday 26 Mar 2020

Europe close: Stocks add to gains as ECB, Fed broaden commitment

(Sharecast News) - Stocks across the Continent added to the previous day's gains after the head of the US central bank reassured investors that we "will not run out of ammunition".
That was despite the biggest weekly increase in weekly US jobless claims ever, which jumped by almost 3.3m people, compared to weekly increases closer to 220,000 in the weeks leading up to the coronavirus pandemic.

In the background, the number of new Covid-19 infections in Italy rose on Thursday, breaking a four-day streak of falls, an event which some media outlets linked to increased testing in the Lombardy region.

"Those who thought that the passage of the $2 trillion stimulus might be time to 'sell the news' have been caught out, with an impressive rebound across Wall Street," said IG chief market analyst.

"Even the highest ever initial jobless claims figure has been unable to dent the boundless confidence apparent in US markets, perhaps because like European PMIs earlier in the week, everyone 'knew' it would be bad."

By the end of trading, the German Dax had turned around to rise 1.28% to 10,000.96, alongside a 2.51% advance on the Cac-40 to 4,543.58, while Milan's FTSE Mibtel was up 0.73% to 17,369.38.

Euro/dollar meanwhile bounded higher 1.42% at 1.1036.

Overnight, the US Senate approved a roughly $2trn economic relief bill that included funds to backstop up to $4.5trn in lending and debt purchases by the Federal Reserve, the country's central bank.

According to one analyst cited by Bloomberg, governments around the world had thus far pledged 2.7% worth of global GDP to fight the coronavirus pandemic, versus the 1.7% deployed in the Great Financial Crisis.

Addressing worries among some traders in the run up to the latest actions from Congress, in remarks to NBC's Today programme, on Thursday morning, Fed chief, Jerome Powell, said that "we are not going to run of ammunition".

Just a few hours before, the European Central Bank said its new €750bn should not be limited to purchasing a maximum of a third of any one country's sovereign debt and that shorter maturities will also be included.

In response to the news out of the ECB the yield on two-year Italian government debt fell by nine basis points to 0.09%, while that on 10-year Greek debt was down by 71 basis points to 1.65%.

There was also some 'market chatter' to be heard earlier that the ECB might activate its Outright Monetary Transactions programme, which would allow it to buy government bonds directly from the secondary market.

However, reports citing ECB sources indicated that was not the case and that the current asset purchase programme was deemed to be more effective.

Consultancy GfK's German consumer confidence index for April printed at 2.7, versus a reading of 8.3 for March (consensus: 7.1) - plumbing its lowest reading May 2009 in the process.

That came alongside a slump in INSEE's French business confidence index for March to 98.0, versus a reading of 101.0 in February.

M3 money supply growth in the Eurozone on the other hand accelerated in February to reach a 5.5% year-over-year pace, versus 5.2% in January (consensus: 5.2%).


Email this article to a friend

or share it with one of these popular networks:

Top of Page