Markets Gain On Europe Qe
Stocks across the US and Europe gained following European Central Bank President Mario Draghi’s press conference on Thursday.
Thursday, March 5, 2015 - 00:00
According to The Wall Street Journal, the ECB will begin purchasing government bonds on March 9 with the intention of aiding economic growth and staving off the threat of deflation.
Additionally, the ECB elected to maintain its current interest rates, including the main rate which sits at a record low 0.05%.
“The latest economic data and survey evidence point to some further improvements in economic activity,” Draghi said during his remarks. “We expect the economic recovery to broaden and strengthen gradually.”
US stocks gained at Thursday’s open. The S&P 500 and Dow both added 0.1% while the Nasdaq increased by 0.3%. Overseas, the Stoxx Europe 600 performed well and was up 0.7% at 10 AM EST.
Draghi hopes for a new economic era in the eurozone
In his press conference, Draghi emphasized his vision of a strong European economy, reported Bloomberg. With the robust quantitative easing plan in place, the ECB president believes that the region will gradually move in that direction.
Inflation growth is one of the key concerns for the 19-nation currency bloc. The economic indicator has remained persistently low. But Draghi told the media that recent measures indicated inflation is on pace to reach the ECB target of just under 2%.
But while the 60 billion euro-per-month bond purchasing program may be a good start, it will take other efforts to maintain European economic health.
“In order to increase investment, boost job creation and raise productivity,” Draghi said, “both the decisive implementation of product and labor market reforms and actions to improve the business environment for firms need to gain momentum in several countries.”
Investors will certainly be watching the situation closely. At least in the short term, quantitative easing has been beneficial for stock markets. But the market can be fickle and if there is not consistent and prolonged evidence that the economic stimulus is working, some investors may take it as a sign the European economy is beyond saving.
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