European stocks steady, euro higher before ECB

European stock markets steadied and the euro climbed Thursday as investors awaited signals from the European Central Bank on a possible inflation surge that could hinder economic recovery from the coronavirus pandemic.

European equities struggled to benefit from a positive lead from Asia and Wall Street, where the Dow ended at a fresh record high overnight, helped by news that US President Joe Biden’s huge stimulus package had cleared its last hurdle in Congress.

Shares in AstraZeneca dropped 2.5 percent in London morning deals after Danish health authorities suspended the use of the pharmaceutical group’s Covid-19 vaccine as a precaution after some patients developed blood clots since receiving the jab.

The region’s main focus was on the outcome Thursday of the ECB’s latest policy meeting.

“The ECB meeting will be a key determinant of market direction in the near-term now that the US stimulus bill has been passed,” noted Chris Beauchamp, chief market analyst at IG trading group.

“Investors will be hoping that the bank will address the rise in bond yields and flag its ability to cope with any sudden rise in inflation, although the lack of any coordinated fiscal stimulus in the eurozone to compare with the US makes these concerns less relevant for European assets.”

The meeting of the ECB’s 25-member governing council is not set to lead to any changes in the bank’s ultra-loose monetary policy.

But ECB chief Christine Lagarde’s press conference in Frankfurt will be scrutinised for clues on what it would take for the central bank to unleash more stimulus to ease fears of a premature end to cheap money.

Fears that a strong rebound in world growth this year will cause a surge in inflation that forces the Federal Reserve and other central banks to wind back their ultra-loose monetary policies — including record-low interest rates — have fuelled a sell-off across risk assets in recent months.

Data on Wednesday, however, showed US prices rose slightly less than expected in February.

That came as a closely watched auction of benchmark US 10-year Treasuries went off without any problems with the notes selling at a yield broadly in line with expectations.

Worries about a surge in inflation have lifted US yields to around one-year highs, while a weak sale of seven-year bonds sparked a stock market sell-off. Yields rise as prices fall.

“For now there is nothing for the inflationistas to ring the alarm, while at the same time it provides the Fed plenty of breathing space” ahead of its meeting next week, said National Australia Bank’s Rodrigo Catril.

The inflation data “suggests the music will keep playing for some time, with the Fed not even close to pondering the option of watering down the punchbowl”.

– Key figures around 1100 GMT –
London – FTSE 100: DOWN 0.2 percent at 6,710.33 points

Frankfurt – DAX 30: FLAT at 14,542.62

Paris – CAC 40: UP 0.2 percent at 6,002.27

EURO STOXX 50: UP 0.4 percent at 3,833.61

Tokyo – Nikkei 225: UP 0.6 percent at 29,211.64 (close)

Hong Kong – Hang Seng: UP 1.7 percent at 29,385.61 (close)

Shanghai – Composite: UP 2.4 percent at 3,436.83 (close)

New York – Dow: UP 1.5 percent at 32,297.02 (close)

Euro/dollar: UP at $1.1964 from $1.1932 at 2220 GMT

Pound/dollar: UP at $1.3961 from $1.3928

Euro/pound: UP at 85.69 pence from 85.60 pence

Dollar/yen: UP at 108.43 yen from 108.38 yen

Brent North Sea crude: UP 1.1 percent at $68.64 per barrel

West Texas Intermediate: UP 1.1 percent at $65.16 per barrel