ECB Vows to Maintain Policy Stance, European Markets Rise

23 Jul 2021 · 3rd Party Analysis

ECB Vows to Maintain Policy Stance, European Markets Rise

WRITTEN BY ThorFX

In Summary

  • Shares in Europe climb on dovish ECB comments, Stoxx 600 closes up 0.56% on Thursday
  • Markets in the US also push higher, up for a third straight day

The European Central Bank on Thursday agreed to hold monetary policy steady. As communicated before the meeting, European rate-setters tweaked the central bank’s forward guidance to reflect its recently modified inflation target. ECB policymakers pledged to maintain a “persistently accommodative” stance until the new 2% inflation target, up from just below that number, is being met consistently.

Stocks across European bourses rose for a third straight day on Thursday, buoyed by the ECB’s decision to keep interest rates lower for longer to allow the bloc’s economy to expand at a quicker pace. Meanwhile, corporate earnings added fuel and propelled the markets higher. Better-than-expected quarterly results strengthened the optimism over the accelerating economic recovery.

The ECB recommitted to its bond-buying scheme of €20bn a month, part of its €1.85tn pandemic emergency purchase program (PEPP). The ECB said in a statement that it expects interest rates to remain “at their present or lower levels until it sees inflation reaching two percent well ahead of the end of its projection horizon and durably for the rest of the projection horizon, and it judges that realized progress in underlying inflation is sufficiently advanced to be consistent with inflation stabilizing at two percent over the medium term.”

“This may also imply a transitory period in which inflation is moderately above target,” it added.

Major European Companies

The pan-continental Stoxx 600 Europe finished the day higher by 0.56%, or 2.56 points, to 456.33. Travel and leisure shares extended their leading position for a second day and added 2.6%. Most sectors and major bourses closed the session in positive territory.

The Spanish IBEX35 led the gains among single-economy indexes as it closed up 0.64%. The German DAX followed with a gain of 0.60%. The French CAC40 climbed 0.26%, while the UK’s FTSE100 turned negative and finished the day lower by 0.43%.

On the European earnings front, Unilever, Roche, Centrica, and others were among the companies delivering their second-quarter financial figures. Unilever dropped 5.9% after the consumer goods producer cut its annual operating margin projection citing a rise in commodity prices.

In the US, stocks maintained their upside momentum and finished the day higher. Major US benchmark indexes extended their gains for a third straight day even amid the biggest weekly jobless claims increase since March. The Nasdaq Composite jumped 0.36%, while the S&P500 and the Dow Jones added 0.20%, and 0.07%, respectively.

New claims for US unemployment benefits rose by 51,000 in the week ending July to 419,000, the US Labor Department said Thursday. The results surprised as analysts had expected new claims to drop to 350,000.

Federal unemployment aid is set to expire on September 6. Many states, however, have already ended the pandemic-related benefits. The latest report showed Texas, which ended jobless benefits, had the biggest increase in jobless claims.

Meanwhile, in cryptocurrency markets, bitcoin advanced for a second consecutive day on Thursday. The original cryptocurrency added about $600, or a little under 2%, to close at $32,200 per token. Ether was also higher, up roughly 4% on the day to close at $2,014.

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