By Carla Mozee, MarketWatch
LONDON (MarketWatch) -- Stocks across Europe finished with minor
gains Thursday, but were unable to hold on to the higher levels
they reached after the European Central Bank's chief said policy
makers were open to considering further easing measures.
The Stoxx Europe 600 closed up 0.1% at 337.25, putting its win
streak at eight sessions. But the index had climbed by as much as
0.5% after ECB President Mario Draghi said during an afternoon news
conference that quantitative easing was part of an "ample" and
"rich" discussion by the bank's Governing Council.
There's been some pressure on policy makers to take action
against low inflation. The ECB, meanwhile, has to consider a slate
of improving manufacturing data and an overall pickup in economic
growth.
Draghi "did absolutely bend over backwards to sound as dovish as
he possibly could in this conference. There's no doubt about it
that he's vigorously employing the tactic of cheap talk, in the
sense that talk is cheap compared to actions," said Nick Beecroft,
senior market analyst at Saxo Bank, in a telephone interview.
"It was news to hear that QE is getting that legitimacy, so to
speak, within the [ECB's] mandate," he said.
Draghi also said policy makers talked about the possibility of
negative deposit rates, under which banks may be encouraged to make
loans to borrowers instead of depositing any surplus of money
overnight at the ECB.
Among banking stocks, shares of HSBC Holdings PLC reversed
course and closed down 0.1%. Barclays PLC rose 0.6%, while shares
of Deutsche Bank AG fell 1.1% following a ratings downgrade to
overweight from neutral by J.P. Morgan Cazenove.
Ahead of Draghi's news conference, the ECB met widely held
expectations by holding its key lending rate at 0.25%. The central
bank also held its deposit rate at 0% and the marginal-lending rate
at 0.75%.
Economists have warned of the threat of deflation or
persistently low inflation as annual inflation in the euro zone has
declined to 0.5%, which is below the ECB's target of near but just
below 2%.
Beecroft believes the ECB, depending upon data, will in June opt
to enact a negative deposit rate. "That would have the corollary
effect of taking the euro down quite effectively," which would be
helpful for exporters and the inflation outlook, he added. The euro
(EURUSD) fell against the U.S. dollar after Draghi's comments.
The Stoxx Europe 600 had swayed between small gains and losses
throughout the session. It again narrowed its advance after the
start of trading in the U.S., where government data showed weekly
claims for unemployment benefits jumped by 16,000 in the last week
of March, to the highest level in a month.
The weekly jobless-claims data arrived ahead U.S. monthly jobs
figures, due Friday, with investors to look at the impact of
inclement weather on the labor market and on the economy
overall.
On Wall Street, the S&P 500 index (SPX) turned lower, along
with the Dow Jones Industrial Average (DJI).
Among country-specific indexes, Germany's DAX 30 settled up by
0.1% at 9,628.82, but it had risen by as much as 0.7% during
Draghi's news conference. Regarding the Deutsche Bank re-rating,
final regulatory rules on additional valuation adjustments for
Europe will likely reduce the German bank's capital by 2.2 billion
euros ($3.03 billion) by the second or third quarter, according to
J.P. Morgan Cazenove. "This decline is material for DB, considering
its relatively tight capital position and market concerns regarding
capital at risk," its analyst Kian Abouhossein said in a note to
clients.
France's CAC 40 pushed higher by 0.4% to end at 4,449.33, the
third straight day of gains for the index. On the economic front,
market-research group Markit said expansion in France's service
sector in March ended four months of decline, driven by a rise in
incoming new work. The activity index reached a 26-month high at
51.5, versus 47.2 in February.
The U.K.'s FTSE 100 ended 0.2% lower at 6,649.14, with losses
for most finance issues and metal producers. Advancers were led by
Aberdeen Asset Management PLC ,fashion house Burberry Group PLC and
Kingfisher PLC . Kingfisher shares rose 3% as the home-improvement
retailer said it's in talks to buy Mr Bricolage, a move that would
stretch its presence in the French market.
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