European Markets Climbed After Central Banks Hold Firm

(RTTNews) - The European markets ended Thursday's session in positive territory after both the European Central Bank and the Bank of England made no changes to interest rates. ECB President Mario Draghi also said that there were no signs of deflation in the euro area and that inflation expectations remain firmly anchored. Corporate earnings results also contributed to the positive mood among investors, as well as the positive performance of the U.S. markets. Attention will now shift to Friday's U.S. jobs report for January.

The European Central Bank decided to leave interest rates unchanged this month, as it faces the classic dilemma of whether to consider the low inflation and high unemployment or the improved sentiment and gradual eurozone recovery, and wait for the fresh round of macroeconomic forecasts due in March.

Following the meeting in Frankfurt, the Governing Council decided to keep the main refinancing rate at a record low 0.25 percent for a third consecutive month. The decision was in line with economists' expectations. The marginal lending facility rate was kept at 0.75 percent and the deposit facility rate at zero, where it has remained since July 2012.

European Central Bank President Mario Draghi said on Thursday that the outlook for euro area inflation remains subdued due to a weaker economy and the bank is ready to consider all available instruments to tackle any money market volatility.

"We are now experiencing a prolonged period of low inflation, which will be followed by a gradual upward movement towards inflation rates below, but close to, 2 percent later on," Draghi said in his customary post-decision press conference in Frankfurt.

"We continue to expect the key ECB interest rates to remain at present or lower levels for an extended period of time."

The Bank of England decided to leave its loose monetary policy unchanged on Thursday, in line with the forward guidance announced last year. The robust labor market development has made the forward guidance based on the unemployment rate insignificant, preventing interest rate expectations from rising.

The nine-member Monetary Policy Committee headed by Governor Mark Carney retained the interest rate at a record low 0.50 percent and the quantitative easing at GBP 375 billion. The outcome of the meeting matched expectations.

Economists expect policymakers to redefine its forward guidance based on a wide range of economic indicators instead of relying only on the unemployment rate, along with the release of Inflation Report on February 12.

The Euro Stoxx 50 index of eurozone bluechip stocks increased by 1.59 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, added 1.28 percent.

The DAX of Germany climbed by 1.54 percent and the CAC 40 of France advanced by 1.71 percent. The FTSE 100 of the U.K. rose by 1.55 percent and the SMI of Switzerland gained 1.30 percent.

In Frankfurt, Daimler shares rallied by 2.63 percent. The luxury auto major posted record sales and profits in 2013, upped its dividend and forecast a "significant" increase in group revenues and operating profit in 2014.

Sky Deutschland, an operator of a subscription television network in Germany and Austria, climbed by 8.59 percent. The company narrowed its fourth-quarter net loss to 80.3 million euros from 91.9 million euros last year.

In Paris, Alcatel-Lucent surged by 9.18 percent. The telecom equipment maker reported a profit for the fourth quarter compared to a hefty loss last year, reflecting improved margins.

In London, Vodafone Group rose by 3.71 percent. The company reported weak quarterly sales figures, but gave a confident outlook.

AstraZeneca dropped by 1.59 percent, after it reported a fourth quarter loss.

Smith & Nephew advanced by 2.46 percent, after its fourth quarter profit increased.

Reckitt Benckiser Group gained 3.33 percent, after Credit Suisse upgraded it to "Outperform" from "Neutral."

Credit Suisse rose by 1.52 percent in Zurich. The bank's fourth quarter profit fell short of expectations.

Akzo Nobel increased by 6.48 percent in Amsterdam, after the paint maker posted fourth-quarter 2013 net income attributable to shareholders of 51 million euros versus a loss of 27 million euros in the previous year.

Volvo climbed by 4.56 percent in Stockholm, after it announced plans to cut 4,400 jobs.

German factory orders declined unexpectedly in December due to a fall in domestic demand, data from the Federal Ministry of Economics and Technology revealed Thursday. New orders fell by 0.5 percent in December from a month ago, reversing the revised 2.4 percent increase in November. Orders were expected to grow by 0.2 percent.

Germany's construction sector expanded for the ninth successive month in January, but at a slower pace than in the previous month, data released by Matkit Economics showed Thursday. The seasonally adjusted purchasing managers' index (PMI) for the construction sector dropped to 52.5 in January from 53.7 in December. The index has now stayed above the no-change 50 mark, which separates growth from contraction, for the ninth successive month.

French business managers said they expect a notable rebound in investment in the manufacturing industry this year, revising up their October forecast for a contraction, a survey by statistical office Insee revealed Thursday. Total business investment is expected to increase 3 percent in 2014 after a 7 percent contraction last year. In October, business managers' predicted a 2 percent decline for 2014.

House price inflation in the U.K. weakened in January, but to a smaller extent than expected by economists, latest data revealed Thursday. The house price index advanced 7.3 percent on an annual basis in January, after gaining 7.5 percent in December, Lloyds Banking Group's housing division Halifax said. Economists had forecast a 7.2 percent growth for January.

The U.S. trade deficit widened by more than expected in the month of December, according to a report released by the Commerce Department on Thursday. The Commerce Department said the trade deficit widened to $38.7 billion in December from a revised $34.6 billion in November. Economists had expected a deficit of $36.0 billion.

After reporting a bigger than expected increase in first-time claims for U.S. unemployment benefits in the previous week, the Labor Department released a report on Thursday showing that initial jobless claims pulled back by more than expected in the week ended February 1st.

The report said initial jobless claims fell to 331,000, a decrease of 20,000 from the previous week's revised figure of 351,000. Economists had been expecting jobless claims to drop to 337,000 from the 348,000 originally reported for the previous week.

With output showing another significant increase, the Labor Department released a report on Thursday showing that U.S. labor productivity increased by more than expected in the fourth quarter of 2013. The report said productivity rose by 3.2 percent in the fourth quarter following a revised 3.6 percent increase in the third quarter. Economists had expected productivity to rise by about 2.6 percent.

Meanwhile, the Labor Department said unit labor costs dropped by 1.6 percent in the fourth quarter after falling by 2.0 percent in the third quarter. Costs had been expected to decrease by 0.7 percent.