Investors Hold Fire Ahead of ECB Meeting

By Josie Cox 

        European markets adopted a holding pattern in early trade Thursday, ahead of a key European Central Bank meeting at which policy makers are expected to provide details of an asset-purchase program worth up to EUR1 trillion ($1.108 trillion) aimed at spurring the continent's economic recovery.
        The Stoxx Europe 600 index, which ended a choppy previous session comfortably in the green, added 0.1% in early trade, while Germany's DAX 30, France's CAC 40 were both around 0.3% higher and London's FTSE was largely unchanged.
        The euro continued to hover around an 11-year low against the U.S. dollar. In early trade it hit $1.1026 against the buck, a level last seen in September 2003. The U.S. Dollar Index, which measures the performance of the greenback against a basket of currencies, also scaled a fresh 11-year high.
        Since the ECB announced its intention to buy up huge amounts of top-rated bonds to stimulate economic recovery, also called quantitative easing, yields on government bonds across the region have aggressively contracted and the euro has fallen sharply.
        Economists at Citigroup wrote in a note Thursday that while the ECB is "likely to welcome these developments" it will also likely imply at the meeting that it is "a good start rather than job done."
        "The market is hungry for details of when purchases will start, how they will be conducted and under exactly what conditions quantitative easing may be ended early," they added.
        Barclays economists, meanwhile, stressed in a note that it is important that investors don't consider the beginning of QE as a solution to all the region's problems.
        "QE isn't a panacea to solve all euro area economic woes," they said, adding that "national and regional level structural reforms remain essential to tackle high unemployment and avoid persistent disinflation on wages and, ultimately, consumer prices."
        Elsewhere Thursday, China lowered its economic growth forecast to about 7% for 2015, ushering in what leaders have dubbed a "new normal" of slower growth in the world's No. 2 economy.
        The move signaled Beijing won't take dramatic action to raise the growth rate above last year's level, which at 7.4% was its lowest in nearly a quarter-century. At the same time, its leaders signaled concerns that an even sharper drop in growth risks higher unemployment and social unrest.
        In commodity markets Thursday, Brent crude edged 0.2% lower to $60.42 a barrel. On Wednesday, oil prices rose after weekly U.S. data showed that inventories at a key storage hub increased less than expected.
        Gold was broadly flat on the day at $1,201 a troy ounce.
        Mark Magnier contributed to this article.
        Write to Josie Cox at josie.cox@wsj.com
        (END) Dow Jones Newswires

        March 05, 2015 03:39 ET (08:39 GMT)

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