European equities climb on eve of ECB meeting

London / AFP

Europe”s stock markets rose on Wednesday on the eve of a key interest rate decision from the European Central Bank, which is widely expected to maintain its stimulative monetary policy.
In afternoon deals, London”s benchmark FTSE 100 index
added 0.3 percent, as dealers also digested a raft of mixed official
economic data.
In the eurozone, Frankfurt”s
DAX 30 rose 0.5 percent and the Paris CAC 40 also won about
0.4 percent compared with the close on Tuesday.
ECB president Mario Draghi and the decision-making governing council convene in Frankfurt Thursday for their regular policy meeting.
“Expectations of continued support from global central banks is providing the momentum for European markets,” said Rebecca O”Keeffe, head of investment at stockbroker Interactive Investor.
The ECB, buoyed by steady data since Britain”s vote to quit the EU, is however set to keep its monetary policy stance unchanged.
“Equity markets would welcome further easing but this remains unlikely; steady trading is likely to continue ahead of the meeting,” noted economist Ana Thaker at trading firm PhillipCapital UK.
“Draghi is most likely to continue his “wait-and-see” approach, with global central banks waiting to assess the economic environment later in the year.”
Many measures announced by the ECB in March — when it lowered rates, expanded its quantitative easing stimulus to 80 billion euros ($90 billion) per month and extended it to buy corporate as well as government bonds, and offered banks new cheap loans — have yet to take full effect. “Mario Draghi is likely to remain in a “do whatever is necessary” mode, so will be keen to talk the market higher, in particular if he can get away without having to follow through with major affirmative action,” O”Keeffe said.
“However, with current headwinds in the form of Italian banks, Greece and slowing German economic activity, he may be forced into facing up to the reality of some difficult issues ahead.
“Nonetheless, he is likely to
stress the continued support of the ECB in offering their full backing
to markets.”
Downbeat UK data
Elsewhere, the British pound dived Wednesday following a recent rally, as traders fretted over mixed data in the wake of Britain”s EU exit vote in June. Manufacturing output — which excludes mining and quarrying, electricity, gas and water supply — tanked by 0.9 percent in July. That was the biggest month-on-month decline in one year.
Industrial production grew by 0.1 percent, defying expectations for a contraction.
“The mixed manufacturing and industrial report… rekindled fears that the EU referendum outcome may have had an undesirable impact on the UK economy,” said FXTM analyst Lukman Otunuga.
“While overall data has painted somewhat of a mixed picture with the UK economy showing some resilience, it still may be too early to weigh the impacts of Brexit to the UK economy.” The pound had risen strongly in recent days on better-than-expected data for Britain gathered following the June referendum.
Across in Asia, traders took a breather after a recent rally, with Tokyo hit by a strong yen as a shock slump in the US service sector ended prospects of an interest rate rise this month.
On Wall Street, at the opening
bell the Nasdaq came off the record high it set on Tuesday, fuelled
by prospects of continued ultra-
low borrowing costs in the world”s top economy, as traders looked ahead to Apple”s expected launch
of a new iPhone and the Federal
Reserve”s “Beige Book” report assessing economic conditions around the country.