European Markets Close Out 2014

European Markets Close Out 2014

Europe’s benchmark index closed out the year higher, but uncertainties loom in 2015.

European Markets Close Out 2014
European Markets Close Out 2014

The European benchmark index closed out the year higher on Wednesday after a half-day of trading for New Year’s Eve, MarketWatch reported. Uncertainty over an upcoming snap election in Greece and where the bottom of the oil price well lies could not prevent many eurozone indices from notching gains, but those risks will face investors when the markets open again on Friday.

Additionally, some analysts expect the European Central Bank to commence quantitative easing as an aid for its stagnant economic growth and low inflation. The bank’s next meeting is on January 22. Even with additional stimulus in place, there is no guarantee that it will be enough to overcome a persistent slide in oil prices.

On Wednesday, the Stoxx Europe 600 moved forward by 0.4%, marking a 4.3% gain on the year. In the last two years the index gained 17% and 14%. The UK’s FTSE 100 added 0.3% on the day but lost 2.7% for the year. Germany’s DAX 30 closed on Tuesday for a yearly advance of 2.7%. France’s CAC 40 finished the day up 0.6% on the day but down 0.5% for the year.

ECB prepares for QE

Peter Praet, executive board member for the European Central Bank, did his best to squash rumors that the bank might not launch a quantitative easing program early in the New Year, according to The Wall Street Journal. In a recent interview, the board member was clear that the ECB intended to begin purchasing sovereign bonds as a means of increasing liquidity in the eurozone.

During the interview, Praet suggested that other policy measures have proven ineffective and the bank is running out of options. The low inflation and struggling growth have become pervasive so the ECB must act to ensure they do not become the new normal. Additionally, the bank is committed to avoiding a political deadlock over negotiations on the terms of QE. Essentially, Praet has confirmed that QE is going to happen in early 2015.

It remains to be seen if this new measure will have the desired effect, but after months of economic weakness and inadequate policies, the ECB is prepared to do whatever is necessary.

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