European stock markets gain on stimulus hopes

People walk towards the building of French telecommunications equipment company Alcatel-Lucent in Calais, northern France.  The company’s shares slumped more than 15.5% in Paris after having risen 17% on Tuesday when Nokia agreed a $16.5bn takeover of Alcatel-Lucent.

AFP/LondonEuropean equities rebounded yesterday as weak Chinese economic growth data stoked Beijing stimulus hopes while the ECB pledged to fully implement its stimulus measures. London’s benchmark FTSE 100 index rose 0.30% to 7,096.78 points, a new record high close. Frankfurt’s DAX 30 index edged up 0.03% to 12,231.34 points and the CAC 40 in Paris rose 0.70% to 5,254.35 points. In foreign exchange activity, the European single currency slid to $1.0613 from $1.0654 late in New York on Tuesday. “The sign-off on a mega-merger within Europe’s telecoms industry between Alcatel-Lucent and Nokia was enough to pull European stocks out of a two-day slump,” said CMC Markets UK analyst Jasper Lawler. “Higher prices were supported by the European Central Bank leaving interest rates unchanged whilst reiterating its commitment to the full implementation of its quantitative easing programme,” he added. Mario Draghi sought to reassure markets that the ECB will fully implement its stimulus programme, following speculation of an early exit on signs it is quickly working to perk up growth and dangerously low inflation in the eurozone. After the ECB decided to keep its main policy rate at the record low 0.05%, Draghi said “there is clear evidence that the monetary policy measures we have put in place are effective.” Last month the ECB began its massive €1.1tn QE or “quantitative easing” scheme under which it aims to buy €60bn of bonds per month until September 2016. “Financial market conditions and the cost of external finance for the private sector have eased considerably over the past months and borrowing conditions for firms and households have improved notably, with a pick-up in the demand for credit,” said Draghi. “Looking ahead, our focus will be on the full implementation of our monetary policy measures,” he added. A major corporate acquisition was also in focus as Finnish telecoms giant Nokia agreed a €15.6bn ($16.5bn) takeover of Franco-American rival Alcatel-Lucent. The deal, creating the world’s biggest supplier of mobile phone network equipment, sent Alcatel shares slumping more than 15.5% in Paris after having risen 17% on Tuesday when talks were confirmed. Nokia shares initially rose in Helsinki after the announcement of the terms of the deal, but ended the day down 1.5%. The merger of two companies – once high-flying new technology stars – is aimed at producing a European champion able to take on Nokia’s Swedish rival Ericsson and fierce Chinese competition. Markets were meanwhile also lifted by rebounding world oil prices, with Brent crude above $59 per barrel on hopes of an easing global supply glut. “Oil related stocks are very sensitive to the price of oil as it directly impacts their profitability,” Oanda analyst Craig Erlam told AFP. “Just as we saw when oil prices were tumbling, the heavy weighting of these large stocks in the indices will often play a big role in their direction on the day.” In London, shares in Royal Dutch Shell rose 1.27% to 2,071.50 pence and BP gained 1% to 475.8 pence, while Paris shares in Total climbed 2.07% to 49.74 euros. US stocks pushed higher yesterday as hopes of more stimulus in China outweighed mixed earnings at home.  The Dow Jones Industrial Average rose 0.28% to stand at 18,087.92 points in midday trading. The broad-based S&P 500 rose 0.44% to 2,105.01, while the tech-rich Nasdaq Composite Index advanced 0.33% to 4,993.61.