By Carla Mozee, MarketWatch Germany lowers growth outlook
LONDON (MarketWatch) -- European stocks jumped to nearly
seven-year highs Friday, wiping out the previous session's sharp
losses, on signs the European Central Bank may introduce
quantitative easing in January after all.
The Stoxx Europe 600 rose 1.8% to 350.97, its strongest closing
level since January 2008, according to FactSet data. The benchmark
extended its rise after the U.S. jobs report for November showed
the economy added 321,000 jobs, the largest gain since early
2012.
On the European benchmark, only the energy-related and mining
sectors finished lower. Shares of Norwegian oil-services company
Seadrill Ltd. dropped 5.9%. Saipem SpA fell 6.2% after the company
late Thursday received notice to suspend marine activities for the
South Stream gas pipeline project. Russian President Vladimir Putin
canceled the project earlier this week.
A Bloomberg report late Thursday raised fresh hopes about ECB's
stimulus plans, as it said the central bank expects to consider a
proposal for broad-based asset purchases, including sovereign debt,
next month. The report cited two euro-area central bank officials.
CNBC also said a source told it the bank will consider quantitative
easing in January.
On Thursday, the Stoxx 600 dropped 1.3%, for its worst
percentage decline since mid-October, as ECB President Mario Draghi
spoke at a press conference. He said policy makers are preparing
for the possibility of easing measures in early 2015, but stressed
that if any action is taken, it won't necessarily happen at the
Governing Council's next meeting. The ECB is slated to meet on Jan.
22.
Mike O'Rourke, chief market strategist at JonesTrading, noted
that the "surprise" Bloomberg report was published three hours
after the end of Draghi's news conference.
"There was once a time when the markets would recognize the
deception and let central bankers know their credibility was
questionable," O'Rourke said in a note Friday.
Data: Calls for the ECB to ramp up stimulus measures have been
spurred by a string of weak economic data from the eurozone. The
latest downbeat update came Friday, as Germany's central bank
slashed its growth forecasts for 2014 and further out. The
Bundesbank now expects adjusted growth in gross domestic product of
1.4% in 2014, lower than a forecast of 1.9% in June. The reduction
came although German industrial orders rose by a
stronger-than-anticipated 2.5% in October.
Also, a second reading of eurozone gross domestic product in the
third quarter confirmed a lackluster growth rate of 0.2%.
The euro (EURUSD) bought $1.2300 compared with $1.2436 late
Thursday, pushed lower after the blowout U.S. jobs report. The
shared currency had risen on Thursday against the greenback on the
prospect that the ECB would hold off on launching stimulus
efforts.
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