European markets turbo charged by Draghi comments

European stock markets closed aggressively higher on Thursday after Mario Draghi, the ECB President, hinted towards more ECB action to help support the eurozone economy.

The FTSE 100 closed higher by 1.4% but more aggressive gains were seen outside of the UK’s shores, with the DAX and CAC both closing higher by 2.7% and 4% respectively. Italian and Spanish stocks advanced the most on the day with the MIB gaining over 5% and the IBEX rallying 6%.

The gains we have seen were triggered pure and simply by Mario Draghi, who shortly before lunch said that the ECB “is ready to do whatever it takes to preserve the euro. And believe me, it will be enough.” That is perhaps one of the most aggressive statements he has made since taking over from Jean-Claude Trichet and traders have lapped it up, translating the rhetoric that the ECB is set to flex its muscles to help reign in spiralling bond yields and boost liquidity.

The FTSE 100 rallied 100 points from the time Draghi spoke to the close and this emphasises just how much Draghi said what investors wanted to hear. That said, it remain rhetoric and we must see action to help justify today’s bullish moves in European equities. It remains to be seen whether traders will use today’s rally as an opportunity to vacate positions at higher levels for the summer break.

It was otherwise a mixed earnings picture in European trading today. Broadcasters performed well with ITC closing higher by 6.3% after reporting half year profits grew 15% to £235m, which was better than many had expected. BSkyB also pleased investors and announced an additional £500m in a share buy back.

However, it was major oil stocks that were a key drag on the FTSE 100 after both Royal Dutch Shell and BG Group both missed forecasts. Shell reported adjusted earnings of $5.7bn which missed expectations of $6.3bn largely down to the drop in oil prices and higher maintenance costs. BG Group reported a 4% drop in quarterly profit to $1.07bn, which also fell short of the $1.1bn expected by most investors. Were it not for these results and subsequent drag on the FTSE, the UK Index would have closed much higher today.

Lloyds Banking Group also gave a mixed report, seeing underlying profits for the first half of the year rise to £1.06bn, slightly ahead of expectations but the bank reported a first half loss due to taking an additional £700m provisions for PPI miss selling. Lloyds shares fell 0.5% as a result, underperforming a FTSE 350 banking sector that rallied 1.5% on the day.

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.