European Markets Rebounded On Banking Strength

(RTTNews) - The European markets ended Friday's session sharply to the upside, bouncing back from yesterday's drop. Markets initially reacted positively to yesterday's extensive stimulus program announced by the European Central Bank, but reversed on comments from Mario Draghi which suggested that rates had reached a bottom.

Markets bounced back on Friday thanks to a strong performance from banking and mining stocks. The ECB's proposal to pay banks for lending to companies is provided a boost to banking shares. China's central bank strengthened the yuan's fixing by the most in four months, which sparked gains among mining stocks.

Rising crude oil prices also contributed to the positive mood, after the International Energy Agency said prices have bottomed due to lower output from the US and other non-OPEC producers.

While there are limits to the central bank's unconventional measures, talking down monetary policy is actually dangerous when fiscal and structural reforms cannot contribute to boost growth, European Central Bank Vice-President Vitor Constancio said Friday.

"If these other policies either can't or won't contribute to a significant degree, then not only is it wrong to start talking down monetary policy - it's actually dangerous," Constancio said in an opinion piece titled "In defence of Monetary Policy" posted on the ECB website.

In its latest round of stimulus, the bank announced a raft of measures for the euro area economy on Thursday, cutting all of its three key interest rates and expanding its asset purchase programme, among others.

Citing ECB Staff estimates, Constancio pointed out that if the ECB had not adopted stimulus measures earlier, then Eurozone inflation would have been a third of a percent negative in 2015 and would have stayed significantly negative throughout this year.

The British Chambers of Commerce on Friday downgraded its economic growth outlook citing weaker than expected expansion across most sectors, reflecting a general global slowdown.

In its Quarterly Economic Forecast, the BCC lowered its U.K. GDP growth forecast to 2.2 percent from 2.5 percent this year. For 2017, the lobby forecast 2.3 percent growth instead of 2.5 percent.

Lower than predicted actual growth in the fourth quarter of 2015, and downward revisions of earlier ONS figures for the first three quarters of 2015, also contributed to the downgrade, BCC said.

The Euro Stoxx 50 index of eurozone bluechip stocks increased 3.47 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, added 2.55 percent.

The DAX of Germany climbed 3.51 percent and the CAC 40 of France rose 3.27 percent. The FTSE 100 of the U.K. gained 1.71 percent and the SMI of Switzerland finished higher by 1.33 percent.

In Frankfurt, Deutsche Bank advanced 7.12 percent despite issuing a cautious outlook for the first quarter. Commerzbank also gained 5.30 percent.

ThyssenKrupp leaped 8.50 percent and Salzgitter jumped 9.01 percent.

Volkswagen increased 4.32 percent and BMW added 4.38 percent. Daimler also finished higher by 4.04 percent.

In Paris, Credit Agricole surged 7.73 percent and Societe Generale advanced 5.73 percent. BNP Paribas also closed up by 5.53 percent.

Peugeot climbed 5.69 percent and Renault rose 3.84 percent. Car parts maker Valeo also added 5.37 percent.

In London, Old Mutual fell 1.78 percent, after the financial group announced plans to split itself into four separate companies in a bid to unlock growth and reduce regulatory costs.

Marks & Spencer dropped 2.11 percent after Bank of America Merrill Lynch downgraded it to "Underperform" from "Neutral."

Royal Bank of Scotland increased 3.56 percent and Barclays rose 3.81 percent. Standard Chartered gained 4.30 percent and HSBC climbed 1.31 percent. Lloyds Banking Group also added 1.74 percent.

BHP Billiton advanced 3.28 percent and Anglo American rose 2.55 percent. Glencore increased 3.24 percent and Rio Tinto added 2.20 percent. Antofagasta also ended the day with a gain of 2.85 percent.

ArcelorMittal jumped 11.24 percent in Amsterdam, after it announced that it will sell new stock to shareholders at 2.20 euros per share as the Steel giant raises about $3 billion to cut debt.

Germany's consumer prices remained unchanged in February from a year ago as initially estimated, final data from Destatis showed Friday. The consumer price index was unchanged after rising 0.5 percent in January and 0.3 percent in December.

Germany's wholesale prices declined at the fastest pace in a year in February largely due to a sharp decrease in fuel prices, Destatis said Friday. Wholesale prices dropped 1.9 percent year-on-year versus 1 percent decrease in January. The index has been falling since July 2013. It was the biggest decline since February 2015.

The U.K. visible trade deficit narrowed in January due to a decrease in imports, the Office for National Statistics showed Friday. The deficit on trade in goods decreased to GBP 10.3 billion, in line with expectations, from GBP 10.5 billion in December. The narrowing was driven by a GBP 0.2 billion decrease in imports.

U.K. construction output dropped in January due to a decline in all new work, the Office for National Statistics said Friday. Construction output decreased 0.2 percent in January from December as expected by economists. All new work dropped 0.8 percent, while all repair and maintenance increased 0.8 percent.

Britons' inflation expectations for the year ahead fell to the lowest level in more than 16 years in February, results of a quarterly survey from the Bank of England showed Friday. Inflation is forecast to be 1.8 percent in the coming year compared with 2 percent predicted in November. This was the lowest inflation expectations since November 1999.

Import prices in the U.S. saw a continued decrease in the month of February, according to a report released by the Labor Department on Friday, although the drop in prices was not as steep as economists had anticipated.

The Labor Department said its import price index dipped by 0.3 percent in February after tumbling by a revised 1.0 percent in January. Economists had expected import prices to fall by 0.8 percent compared to the 1.1 percent decrease originally reported for the previous month.

The report also said the export price index dropped by 0.4 percent in February after sliding by 0.8 percent in January. Economists had expected export prices to decline by 0.5 percent.