ECB Governing Board meets amid Italy chaos and trade war fears

ECB Governing Board meets amid Italy chaos and trade war fears

ECB Governing Board meets amid Italy chaos and trade war fears

The pan-European STOXX 600 was up 1.1pc at its close. France's CAC 40 led the way, still up 1.15%. Germany's DAX 30 index finished up 0.9% at 12,355.57.

The euro fell 0.8 percent to $1.2315.

What was driving the market?

The removal of the so-called easing bias from its monetary policy decision sparked a rally of euro against the USA dollar.

In recent weeks the President of the European Central Bank (ECB), Mario Draghi has made it clear that the devaluing United States dollar is strengthening the Euro considerably and is a concern, as he doesn't want the Euro to be overvalued which will halt rising inflation levels. The euro trade-weighted index this week hit its highest since September 2014.

The euro had earlier climbed, and stocks dropped, after the European Central Bank gave up its pledge to expand or extend quantitative easing if the economic outlook deteriorated.

"We forecast the European Central Bank to drop its bias to increase asset purchases in size, if necessary, in April", Berenberg economist Florian Hense said.

Before the vote, the other members of the Bank of Latvia's supervisory board banned Rimsevics from attending meetings of the European Central Bank governing council.

Draghi also unveiled the bank's latest growth and inflation projections. Besides, eurozone's inflation has not shown any significant rise since January's meeting but instead, it inched lower from 1.3% to 1.2% y/y according to initial CPI estimates for the month of February. The ECB has said purchases will continue at 30 billion euros ($37 billion) monthly at least through September.

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Donald Trump's top economic adviser Gary Cohn, who had told the US president that markets would slump on a tariffs threat, resigned on Tuesday in a move that could ramp up protectionist measures that risk igniting a global trade war. The ECB Chief also noted that the immediate spillover of U.S. import tariffs on foreign steel and aluminum are unlikely to be that big.

Incoming information, including our new staff projections, confirms the strong and broad-based growth momentum in the euro area economy, which is projected to expand in the near term at a somewhat faster pace than previously expected. "But if it's a negative effect on confidence that's going to be negative on both inflation and the outlook". "Now watch for a slightly more dovish Draghi in the press conference".

Which stocks were in focus?

Atlantia, which confirmed preliminary talks with ACS over Abertis, gained 5.1pc, while Abertis fell 4pc.

JCDecaux SA (DEC.FR) slid 3% after the outdoor advertising company said profit slumped 14% on 2017 (http://www.marketwatch.com/story/jcdecaux-profit-falls-14-in-2017-on-tax-charge-2018-03-08-14854617).

Britvic PLC (BVIC.LN) jumped 6.2% after Morgan Stanley upgraded the soft drinks maker's rating to overweight from equalweight.

Analysts said reports that Italy's centre-right alliance was reaching out to lawmakers from the Democratic Party to seek support for a broad governing alliance after Sunday's inconclusive election was also supporting Italian debt.

Gold dropped 0.4 percent at $1,320.68 an ounce.

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