Börse&Märkte

European Markets Extend Previous Session Gains

European share markets are extending previous session gains Wednesday, propped up China’s central bank taking action by injecting funds into some lenders, accommodative-friendly remarks by ECB head Draghi and consumer sentiment data out of Germany out earlier in the day. A day after saying liquidity is being monitored, managed and ample, China’s central bank responded overnight with a cash injection to some lenders who were in need of it. Traders yesterday were not entirely convinced the PBoC will follow through with their statement however today’s move suggests the central bank is ready to respond and will continue to do so, preventing a cash crunch in the world’s second largest economy which is already suffering slow-down.

ECB chief Draghi’s remarks that monetary policy remains accommodative and the central bank stand ready to act were not fresh but with markets fearing an end to global central bank liquidity, his comments did go some way in reassuring investors that the ECB’s emergency services are still available. Draghi said he is ready to use the OMTs if needed but did again stress that monetary policy from the ECB can only do so much and it’s up to governments to repair their own economies. The euro barely reacted to the news, struggling against the stronger US dollar. Core government bonds such as German bunds were higher in a sign that the tone is still risk-off.

But, money market rates in Europe declined after Draghi’s comments, while stocks took heart in his words. Banks advanced, particularly the Spanish components of the Stoxx600 banks index after Citigroup raised mid-cap Spanish banks to neutral from underweight. Earlier, Germany’s GfK consumer sentiment survey increased for the sixth-month straight, painting a brighter picture of Germany’s economic prospects heading into the second half of 2013. In the US on Tuesday, we had a solid increase in consumer confidence together with estimate-beating prints of durable goods orders and two reports from the housing market. Investors are now casting their attention to US GDP data for the Q1 for further clues over the state of the US economy.