European Markets Close Higher On Dovish Comments From ECB

European markets closed higher on Thursday, reacting to dovish comments from the European Central Bank, and some encouraging earnings announcements.

The ECB left its key interest rates unchanged, but revised its forward guidance on the same to support its new inflation target. The central bank left the main refinancing rate at 0%, the deposit rate at -0.5% and the marginal lending rate at 0.25%, in line with economists’ expectations.

Policymakers decided to revise its forward guidance on interest rates as the key ECB interest rates have been close to their lower bound for some time and the medium-term outlook for inflation is still well below the Governing Council’s target.

“The Governing Council expects the key ECB interest rates to remain at their present or lower levels until it sees inflation reaching two per cent well ahead of the end of its projection horizon and durably for the rest of the projection horizon, and it judges that realized progress in underlying inflation is sufficiently advanced to be consistent with inflation stabilizing at two per cent over the medium term,” the bank said.

The bank also said that asset purchases under the Pandemic Emergency Purchase Program, or PEPP, will continue with a total envelope of EUR 1,850 billion until at least the end of March 2022 and, in any case, until the judges that the coronavirus crisis phase is over.

Among the major markets in Europe, Germany closed on a firm note with its benchmark DAX climbing 0.6%. France’s CAC 40 gained 0.26%. The pan European Stoxx 600 surged up 0.56%. The U.K.’s FTSE 100 and Switzerland’s SMI declined 0.43% and 0.37%, respectively.

Among other markets in Europe, Austria, Belgium, Czech Republic, Denmark, Finland, Greece, Ireland, Netherlands, Portugal, Russia, Spain and Sweden closed higher.

Norway edged up marginally, while Iceland, Poland and Turkey ended weak.

In the German market, Siemens climbed nearly 3%. MTU Aero Engines, Merck, Lufthansa, RWE, Vonovia, Fresenius, HeidelbergCement, BASF, BMW and Daimler gained 1 to 2%.

Beiersdorf, Deutsche Telekom, Henkel and Infineon Technologies ended notably lower.

In France, Air France-KLM rallied more than 3.5%. Dassault Systemes, WorldLine, Teleperformance, Capgemini, Schneider Electric, Renault, Vinci, Vivendi, Sodexo, Faurecia, Thales and ArcelorMittal gained 1.3 to 3%.

Publicis Groupe pared gains after a sharp uptick. The French advertising giant reported strong second-quarter growth, reflecting an industry resurgence from the worst of the pandemic.

Danone, Safran, Airbus Group and Technip ended notably lower.

In the UK market, Unilever plunged nearly 6% after it announced a drop in first-half profits on rising costs. Persimmon declined by more than 4%. Natwest Group, Reckitt Benckiser, Rio Tinto, Associated British Foods, BP, Rolls-Royce Holdings and Royal Dutch Shell shed 1.6 to 2.7%.

On the other hand, Flutter Entertainment, 3I Group, Just Eat Takeaway, Ocado Group, Entain and Royal Mail gained 3 to 4.5%. Entain, Royal Mail, Taylor Wimpey, ICP and Halma also ended sharply higher.

In the Swiss market, ABB gained in strength after doubling its full-year sales outlook and announcing that it is considering a spin-off of its electric vehicle charging business.

In economic news, French manufacturing confidence strengthened to the highest level in more than three years in July largely driven by the assessment of foreign orders and personal production expectations, survey results from the statistical office Insee showed.

The manufacturing sentiment index advanced to 110 in July from 108 in June. This was the highest score since April 2018 and above economists’ forecast of 107.

UK manufacturers’ expectations about output growth over the coming three months reached a record high, the Industrial Trends Survey results from the Confederation of British Industry showed.

In the three months to July, output volumes grew at the joint-fastest pace on record, with the balance rising to 37%.

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