World Stocks Jump On Possible European Stimulus

Europe Stimulus

Stocks around the world jumped on the news that the European Central Bank might be looking at new stimulus measures for the continent.

Mario Draghi, president of the ECB, raised hopes on Thursday when he said that the central bank will “re-examine” its current stimulus program in December and pointed to “flexibility” in its asset-buying program. That news comes amid a struggling European economy and global stock prices that have been on a roller coaster since the summer.

Draghi’s words sparked European market rallies on Friday, with France’s CAC 40 (1.9%), Germany’s DAX (2.1%) and Britain’s FTSE 100 (1.2%) all up. Dow futures, meanwhile, were trading up a half percent ahead of Friday’s open in New York. Nasdaq 100 futures were also up while The MSCI All-Country World Index continued its streak of gains, the longest since early this year, while the Stoxx Europe 600 was also trading higher.

The ECB news puts pressure on the Fed, as well as other central banks like Japan’s, to also consider new stimulus measures or slowing down attempts at normalization – the Fed, for example, has been insisting that the American economy was getting strong enough to sustain a long-awaited interest rate hike sooner rather than later.

Shane Oliver, of Sydney’s AMP Capital, told the Washington Post that the European Central Bank “looks to be replacing the Fed as investors’ best friend. The ECB’s strong easing bias is very supportive of eurozone shares, but because it puts downwards pressure on the value of the euro it adds to pressure on the Bank of Japan to consider further easing and on the Fed to further delay rate hikes.”

And Soeren Steinert, of Quondam Asset Management in Frankfurt, told Bloomberg that “the hope that cheap money is here to stay for longer, together with stronger earnings, is helping stocks. There were many fears in the summer and none of them came true so people are buying again because they had closed their positions.”

Written by Gene Giannotta

Gene Giannotta is a writer based in Washington, D.C. He reports on economic policy, finance and business news.