European stocks finished modestly higher Thursday, with bank shares charging up as European Central Bank Mario Draghi suggested deflationary pressures have lessened, though energy shares lost ground as oil prices slid.
The pan-European index had been down 0.3% as Draghi started his Thursday afternoon news conference in Frankfurt. But bank shares began to stage a turnaround, pushing the Stoxx Europe 600 Bank Index /zigman2/quotes/210599339/delayed XX:SX7P +0.14% higher by 1.1%.
Draghi said the ECB removed language from his previous statements that had said the bank would act, if warranted, to achieve its inflation objectives by using all the instruments available within its mandate. Now, “that urgency that was prompted by the risks of deflation isn’t there,” spurring the change, he said.
A drop in interest rates to record lows and negative levels has been among the instruments employed by the ECB, and low rates have hurt profit margins at European banks.
Among bank shares, Germany’s Deutsche Bank AG /zigman2/quotes/205584254/delayed DE:DBK +1.05% climbed 1.4%, Spain’s Banco Santander SA /zigman2/quotes/205677933/delayed ES:SAN +1.72% advanced 2.5%, and France’s Société Générale SA /zigman2/quotes/206663756/delayed FR:GLE -0.29% tacked on 2.1%.
“European political uncertainty and still-low core inflation will continue to argue for policy maker caution for several more months, but improving labor markets and better growth dynamics across the currency union should at least allow for more positive policy discourse,” wrote Tim Graf, head of macro strategy at State Street Global Markets.
Before Draghi’s news conference, the ECB left its key interest rates unchanged, meeting widely held expectations.
In the fixed-income market, the yield on the 10-year German bund /zigman2/quotes/211347112/realtime BX:TMBMKDE-10Y 0.00% was pulled up 5 basis points to 0.42%, according to Tradeweb. European bond prices fell as Draghi said a “sense of urgency” over the potential need to take further action to support the eurozone economy has dissipated.
The euro /zigman2/quotes/210561242/realtime/sampled EURUSD +0.1346% scaled up to an intraday high of $1.0617, up from $1.0546 late Wednesday in New York. It was recently at $1.0584.
Energy: Oil and gas shares /zigman2/quotes/210599627/delayed XX:SXEP +0.69% lost ground as crude prices suddenly swung lower, pushing West Texas Intermediate oil below $49 a barrel for the first time this year.
The Stoxx Europe 600 Oil & Gas Index /zigman2/quotes/210599627/delayed XX:SXEP +0.69% dropped 1.5%.
Movers: Akzo Nobel NV shares /zigman2/quotes/209835399/delayed NL:AKZA -0.54% /zigman2/quotes/204497961/composite AKZOY +0.95% rallied 13% after the Dutch maker of Dulux paint and other products rejected a €20.9 billion ($22.1 billion) unsolicited offer from PPG Industries Inc. /zigman2/quotes/202418877/composite PPG +0.23% .
Merck KGaA shares /zigman2/quotes/209909728/delayed XE:MRK +0.03% pulled back 2.7% as the German pharmaceuticals and chemicals issued a cautious outlook for 2017. The company’s fourth-quarter net profit more than doubled.
Aviva PLC charged up 6.5% after the insurer raised its dividend by 12% and said it’s considering returning more capital to shareholders this year.
Indexes: Germany’s DAX 30 /zigman2/quotes/210597999/delayed DX:DAX +0.01% finished up 0.1% at 11,978.39, and France’s CAC 40 /zigman2/quotes/210597958/delayed FR:PX1 +0.08% gained 0.4% to 4,981.51. But the U.K.’s FTSE 100 /zigman2/quotes/210598409/delayed UK:UKX +0.27% fell 0.3% to end at 7,314.96, hurt by drops for commodities stocks.