Europe Markets: European Stocks Flip Up As Draghi Talks About Keeping Up Bond Buying

European stocks latched onto small gains Wednesday, buoyed after European Central Bank President Mario Draghi said its bond-buying program will likely continue if underlying inflation in the region remains subdued.

Meanwhile, investors were sifting through more corporate updates, including one from Adidas AG that sent shares of the German sports gear maker flying higher by double digits.

How markets are moving

The Stoxx Europe 600 index SXXP, +0.37% rose 0.1% to 375.83, led by gains for consumer goods and telecom stocks. But tech stocks lost the most. On Tuesday, the index dropped 1%, largely as the euro and the pound surged against the U.S. dollar.

France’s CAC 40 index PX1, +0.38%  turned up by 0.1% to 5,249.16. Germany’s DAX 30 DAX, +0.46% rose 0.3% to 12,254.03.

The U.K.’s FTSE 100 index UKX, +0.34% rose 0.3% to 7,1621.44, but Spain’s IBEX 35 IBEX, +0.26%  fell 0.3% to 9,658.40.

The euro EURUSD, -0.0807%  bought $1.2373, down from $1.2392 late Tuesday in New York.

What’s driving markets

Regional indexes began to rotate higher as the euro pulled back during a speech by ECB President Mario Draghi at conference in Frankfurt. He did say the eurozone economy has been strengthening more than it had anticipated.

However, “there is a very clear condition for us to bring net asset purchases to an end: we need to see a sustained adjustment in the path of inflation towards our aim, which is a headline inflation rate of below, but close to 2% over the medium term,” he said, adding that “the performance of underlying inflation remains subdued compared with previous recoveries.”

The euro declined as soft inflationary pressures would likely keep the European Central Bank from raising interest rates in the foreseeable future. “The key issues we need to examine are wage dynamics, their pass-through to prices, and the possible risks to the inflation outlook,” said Draghi.

A weaker euro can help bolster shares of European exporters as it makes their goods and services less expensive to purchase for overseas buyers. The euro on Tuesday leapt above $1.24 for the first time since March 8 after an expected reading of U.S. consumer prices February tamped down concerns that the Federal Reserve will raise interest rates four times in 2018 instead of three as previously expected.

The eurozone’s final reading of consumer price inflation for February is scheduled for release on Friday.

What strategists are saying

“After the moves on the greenback yesterday, this morning has seen Mario Draghi undo some of the work on EURUSD with the pair falling lower after the ECB president was a little clearer on some points. Inflation was the main point he made saying that stronger CPI adjustment would be a reason to end the QE, but of course reiterated that patience is the key when it comes to the monetary policy,” said James Hughes, chief market analyst at AxiTrader, in an note.

Stocks in focus

Adidas AG shares ADS, +8.07% jumped 9% for the Stoxx Europe 600’s biggest gain after the sporting goods company upgraded its long-term profitability target even as its posted a fourth-quarter net loss due to a one-off negative tax effect. Adidas will also propose lifting its dividend of €2.60 a share and that it will initiate share buyback program of up to €3 billion.

Shares in Inditex SA ITX, +1.94% fell 2.6% as the parent company for apparel retailer Zara said sales in stores that have been open for a year or more rose 5%, a marked slowdown from the 10% growth reported the previous period.

Prudential PLC PRU, +6.05% climbed 5% after the financial services company saying it will demerge M&G Prudential. Following that move, M&G Prudential will be an independent provider of savings and investment services.

Shares in Bpost BPOST, -19.94% tumbled 19% for the Stoxx 600’s biggest drop after the Belgian postal-services company forecast 2018 core earnings of 560 million euros ($693 million) to 600 million euros. That was below a Thomson Reuters consensus estimate of 637 million euros.


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