European stocks leapt to a one-week high Thursday after the European Central Bank offered a brighter assessment of economic growth in the eurozone, and as the euro retreated from intraday gains.
How did markets perform?
The Stoxx Europe 600 index /zigman2/quotes/210599654/delayed XX:SXXP +0.73% climbed 1.1% to 376.62, the best close since Feb. 28, FactSet data showed. All sectors rose, led by the consumer-goods group.
France’s CAC 40 index /zigman2/quotes/210597958/delayed FR:PX1 +0.20% surged 1.3% to 5,254.10, its highest close since Feb. 7. Germany’s DAX 30 index /zigman2/quotes/210597999/delayed DX:DAX +0.72% finished up 0.9% at 12,355.57.
Italy’s FTSE MIB tacked on 1.2% to 22,731.10, and the U.K.’s FTSE 100 index /zigman2/quotes/210598409/delayed UK:UKX +1.19% rose 0.6% to end at 7,203.24.
The euro /zigman2/quotes/210561242/realtime/sampled EURUSD -0.0189% dropped to $1.2314 from $1.2411 late Wednesday in New York.
The yield on the 10-year German bund /zigman2/quotes/211347112/realtime BX:TMBMKDE-10Y 0.00% fell 3 basis points to 0.625%, according to Tradeweb, as prices rose.
What was driving the market?
Stocks ran higher during afternoon trade as investors yanked the euro from its intraday high of $1.2447 against the U.S. dollar. Shares of European exporters can be hurt when the euro rises, as euro strength can reduce revenue made overseas by such companies.
The euro retreated as ECB President Mario Draghi, at a Frankfurt press conference, emphasized more dovish elements of the bank’s monetary policy statement issued Thursday, including a commitment to maintaining rates at present and low levels if warranted. The euro’s fall paved the way for stocks to scramble higher.
The euro had earlier climbed, and stocks dropped, after the ECB gave up its pledge to expand or extend quantitative easing if the economic outlook deteriorated. The bank dropped the line that it would stand “ready to increase the asset purchase programme (APP) in terms of size and/or duration,” if the economic outlook became “less favorable.”
Traders were waiting to see if the rate setters would remove that particular bit, as it could indicate the end of QE is moving closer.
Draghi said economic growth in the eurozone is improving faster than the bank had anticipated, leading it to nudge up its 2018 growth forecast to 2.4% from 2.3%. It slightly reduced its 2019 inflation forecast to 1.7% from 1.9%.
The ECB left its refinancing rate at 0%. The ECB also reiterated that the current €30-billion-a-month stimulus program will “run until the end of September 2018, or beyond, if necessary.”
European stocks had opened in positive territory as tensions over planned U.S. tariffs on steel and aluminum imports eased after the White House indicated that major trading partners Canada and Mexico could be exempt. U.S. President Donald Trump is expected to sign the tariff order on Thursday, with an announcement planned for 3:30 p.m. Eastern Time, according to media reports.