The benchmark gauge of European stocks is heading towards its 9th consecutive monthly gain, thanks to the recent signals of Ben S. Bernanke, the Federal Reserve Chairman and Mario Draghi, the President of European Central Bank.
The Stoxx Europe 600 Index increased by 0.7% and is currently at 289.04. This month, the currency has advanced by 0.7% from its closing value for January. Euro’s current monthly winning streak is incidentally the biggest in last 16 years. In 2013, the benchmark gauge has jumped up by 3.4% thanks to the budget deal agreement of US policy makers at the start of this year.
The portfolio manager of Diem Client Partner AG, Daniel Gschwend stated that as the business results are positive now and Central Banks are signaling further expansions, the upward trend on equity markets is expected to continue further. He added that as the streak has been pretty long now, a substantial correction should be expected soon.
Draghi incidentally signaled that he has no intentions of tightening the monetary policy in near future as the inflation is expected to undershoot significantly the target of 2% in next year. The balance sheet of European Central Bank should shrink now as investor confidence towards the financial markets is increasing. Apart from that, banks have also started to repay the emergency loans and under such circumstances, policy makers are far from thinking of an exit from the monetary stimulus undertaken.
On the other hand, Bernanke is defensive about the record stimulus and he added that accommodation has played its part in declining the borrowing costs and spurring growth further. Bernanke commented that the Federal Reserve may decide to hold the bonds on the $3.1 trillion balance sheet to maturity as it is going to review the possibility of exiting from the record monetary easing in future.
Bayer AG jumped up to the highest figure in last 4 weeks after stating that sales are expected to increase by 4% to 5% in 2013. The biggest phone company of Spain, Telefonica, also surged ahead by 1.4% as its 4th quarter earnings surpassed the initial estimates. On the other hand, the Royal Bank of Scotland Plc. went down to its lowest figure in 2013 as it posted wider full-year loss figure. The largest bank in Europe by market value, HSBC Holdings advanced by 1.3%.