European indices rose on Wednesday for the second consecutive day as investors are optimistic that the European Central Bank will increase stimulus, according to MarketWatch.
Thursday, December 4, 2014
The Stoxx Europe 600 rose 0.4% this morning and was on pace to reach its highest mark since the beginning of September. Germany’s DAX 30 gained 0.2% higher, while France’s CAC 40 and the UK’s FTSE 100 both dipped lower.
The final eurozone composite purchasing managers index fell short of expectations, notching 51.1 for November after reaching 52.1 in October.
“The survey data suggest the region is on course to see a mere 0.1% GDP growth in the final quarter of the year, with a strong likelihood of the near-stagnation turning to renewed contraction in the New Year unless demand shows signs of reviving,” Chris Williamson, chief economist at Markit, said in the release.
Investors await Thursday’s ECB meeting
The biggest economic event of the week for the eurozone is undoubtedly the December meetingof the European Central Bank on Thursday, according to The Wall Street Journal. Generally speaking, investors will analyze ECB officials’ remarks to determine how soon the bank will launch its large-scale government bond purchasing program, or quantitative easing.
With persistently low inflation, eurozone economists have wondered when the ECB would step up its stimulus efforts. The bank’s vice president Vitor Constancio indicated the first quarter of 2015 would be the most likely target, but that is by no means a guarantee.
European Central Bank President Mario Draghi will give an introductory statement that could prove to be the barometer for the ECB’s stance toward quantitative easing. Whatever assessment he gives in the press conference will likely echo the views held by the 24-member board.
Other factors that investors will be watching for include inflation forecasts and oil prices. The inflation outlook for 2015 could very well include a reduction from 1.1% in light of weak consumer price growth. Meanwhile, oil prices have fallen to their lowest level in years, weakening inflation targets further. On the other hand, cheap oil prices help to raise disposable incomes. Draghi’s opinion on low oil prices – whether they are a positive or a negative – could also indicate how the ECB will behave.
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