LONDON: European stocks hit new multi-year highs on Tuesday, buoyed by hopes that the European Central Bank will this week plan into unexplored territory by authorizing purchases of government bonds in a bid to stimulate monetary growth.
The Stoxx Europe 600 SXXP, +0.79% ended the day up 0.8% at 355.96 — having earlier in the session hit a seven-year high — while London’s FTSE 100 UKX, +0.52% added 0.5% to 6,620.10, and France’s CAC 40 PX1, +1.16% climbed 1.2% to 4,446.02.
Germany’s DAX 30 DAX, +0.14% rose 0.1% to 10,257.13, a record close, according to FactSet data. The index during the session had erased gains after figures from the country’s ZEW institute showed that investor sentiment in January has risen more than expected, which may, some say, marginally weigh on the argument for broad-based and vigorous ECB action.
Government bonds in many European countries continued to hover close to record highs on the expectation that the ECB will act during its Thursday meeting.
The German central bank said Tuesday that it was preparing to auction €5 billion ($5.79 billion) of five-year government bonds Wednesday with a coupon rate of zero. Spain, meanwhile, sold €9 billion of 10-year bonds at a record low yield of 1.656% Tuesday, via a syndicate of banks.
“We expect the ECB to announce a program of around €500 billion to €750 billion of [European government bond] purchases and our economists believe that the ECB will signal it will stay open so long as inflation and inflation expectations remain unacceptably low,” Barclays strategists wrote in a note.
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