European Stocks returned to near-record highs on Thursday. Strong corporate earnings and investors betting on the European Central Bank to keep its stimulus taps full open while the pandemic remains a threat to economic growth pushed stocks higher ahead of the latest policy announcement.
Investors’ worries about the Delta variant of COVID-19 have calmed, bringing back appetite for riskier assets. At 3:10 AM ET (0810 GMT), the DAX in Germany was 0.8% higher. Moreover, the CAC 40 in France was up 0.6%, while the U.K.’s FTSE 100 was largely flat.
The STOXX index of 600 leading European shares climbed 0.6% at 456.53 points. Last week, the index was at its lifetime high of 461.38 points.
The stock rallies, which were a positive start, came after gains from both Asia and Wall Street overnight. They rebounded from the rout on fears relating to the rising virus cases and how these could derail economic recovery globally.
Mostly, positive corporate results helped the stock markets recover. The new quarterly earnings season was starting.
Unilever shares were down 4.4%, following its warning that surging commodity costs would squeeze its full-year operating margin, obscuring solid Q2 sales growth.
French advertising giant Publicis stock added 2.5% and reported strong second-quarter growth. It said that its financials would make a full return to pre-pandemic levels this year.
Engineering firm ABB stock rose 1.5% after doubling its full-year sales outlook. The company also said it’s considering a spin-off of its fast-growing unit for charging electric vehicles.
The European Central Bank
The main focus of investors on Thursday will be on the European Central Bank’s policy-setting decision, which is due at 7:45 AM ET (1145 GMT). A press conference with President Christine Lagarde follows the meeting.
The ECB recently changed its inflation target. With that, investors will be looking to see if this changes the course of its monetary policy. Earlier this week, Lagarde has said that the meeting will have some interesting variations and changes.
Meanwhile, Michael Hewson, chief markets analyst at CMC Markets, said that the ECB would precisely do what the market expects.
“In light of recent events in western Europe, the flooding, the last thing that Europe needs at the moment is a tightening of monetary policy,” he said about last week’s devastating floods in Germany and Belgium that killed over 180 people.
The markets are in a bit of pincer movement between concerns about higher inflation and lower growth, and that will continue, the chief market analyst added.