European stocks hover near 8-month high before ECB meet

Bloomberg

European stocks were little changed, poised for their highest close since January, as investors awaited this week’s European Central Bank meeting.
The Stoxx Europe 600 Index added 0.1 percent at 1:43 p.m. in London, paring a rise of as much as 0.3 percent, while Germany’s DAX Index added 0.4 percent, inching closer to erasing its annual drop. Europe’s benchmark moved higher for the past three days, surging on Friday after U.S. data signaled the labor market is holding steady without strengthening the case for an imminent rate increase. Traders are pricing in less than even odds of a Federal Reserve hike until December. Investors are assessing the probability that global central banks will keep monetary policies supportive of risk assets, before Thursday’s ECB rate decision. Most economists predict President Mario Draghi will lengthen quantitative easing for a second time, with euro-area inflation stuck near zero for almost two years and Britain’s secession vote threatening to undercut the region’s recovery.
“We have come a long way in equity markets. There is uncertainty on the ECB and on the Fed,” said Philippe Gijsels, chief strategy officer at BNP Paribas Fortis in Brussels. “The consensus is the ECB is going to expand the asset purchase program by six more months, prolonging it until September 2017. The market is a bit nervous because there are still a few questions and rumors, and that’s putting a bit of pressure.”
At the last ECB meeting in July, Draghi said officials have shown they can adjust QE when required, that there should be no doubt they can stick to their pledge to keep spending 80 billion euros ($89 billion) a month until March 2017 “and beyond if needed.” Data before this week’s rate decision show a mixed picture of the economy: while a report today showed a surge in euro-area exports in the second quarter, another showed German factory orders increased less than forecast in July.
The volume of Stoxx 600 shares traded was 28 percent lower than the 30-day average, data compiled by Bloomberg showed. A gauge of euro-area volatility fell 1.1 percent toward an almost one-month low.