European stocks were bumped a little higher as they followed in the footsteps of the Asian markets which were standing at 12 month peaks due to better-than-projected trade figures from China, the world’s second largest economy.
Many interested observers will now be looking keenly at any announcement by the European Central Bank (ECB) regarding forthcoming monetary stimulus, and Frankfurt are under moderate pressure to kick start a flagging European economy.
The Chinese trade figures, which featured their first annual gain in imports for two years, were a ray of hope in a fairly mixed bag of reports, and some analysts say there is a chance ECB President Mario Draghi will announce that the bank will continue their 90 billion euro per month asset purchasing scheme.
Most experts expect the central bank rates to stay as they are however, with 80 percent of a recent Reuter’s survey expecting no change.
The euro is already trading at a fortnightly high of $1.1278 as of Wednesday, and further easing by the ECB is unlikely to weaken the currency further. Should the central bank decide to change rates it would fuel rumors that further stimulus will be added.
“We are not really looking for the same tired strategy of expansion of the quantitative easing or rate cuts,” said Anthony Russell, Senior Vice President at Monex BMO Securities in an email to clients. “A weaker euro is only going to be achieved by coming up with something a bit more innovative. A new package completely.”
“The markets are already familiar with expansion of the current method, and we have learnt that it doesn’t work. We haven’t seen inflation hit target levels,” Russell added.
Traders preferring slightly riskier investments like emerging markets and stocks may be rubbing their hands together though. If the U.S. Federal Reserve decides to keep their rates unchanged due to the generally murky looking economic waters there could be interesting opportunities in those areas.
There has still not been any clear sign of how the Fed is going to proceed, but recent history has shown they are in favor of very small, incremental rate hikes. Investors are not expecting anything groundbreaking in the next announcement.
London’s FTSE 100 was slightly up in the early trading along with most other euro zone markets with banking stocks leading the gains, while Asia-Pacific shares climbed 0.2 percent, slightly lower than the Wednesday crest.
