MW: European stocks waver after more frail German data
LONDON (MarketWatch) — European stocks struggled for direction on Wednesday after a sluggish reading on German business confidence added more pressure on the European Central Bank to stimulate the eurozone economy.
German Ifo: Wednesday offered another red flag for the German economy, with the Ifo survey for business confidence dropping to a 17-month low in September. The closely watched business-climate index fell to 104.7 points from 106.3 points in August, falling short of forecasts. Hans-Werner Sinn, president of the Ifo Institute, said in the release that the “German economy is no longer running smoothly.”
The weak Ifo reading comes a day after the manufacturing purchasing managers’ index for Germany showed growth in factory activity dipped to a 15-month low in September. The Ifo index and manufacturing PMIs often move in the same direction as pictured in the chart below, highlighting that the country’s economy at the moment is losing steam.
Draghi comment: European Central Bank President Mario Draghi has been speaking on several occasions this week, reiterating that the central bank will keep monetary policy loose for a considerable amount of time.
In an interview conducted by French radio station Europe 1 and published on Wednesday, Draghi said again that the Governing Council is committed to “use the available instruments within its mandate” to bring inflation back to the target of close, but below 2%. He said, however, that the ECB doesn’t see a risk of deflation or recession in the eurozone.
Draghi is also scheduled to speak in Lithuania on Thursday.
Market reaction: With two straight days of weak German data, pressure is again building on the ECB to ease the economy even further. Such expectations were keeping losses in check in Wednesday’s trade, with the Stoxx Europe 600 index SXXP, +0.20% only down slightly at 341.82.
Germany’s DAX 30 index DAX, +0.07% fell 0.2% to 9,576.36, on track for the lowest close since early September.
The U.K.’s FTSE 100 index UKX, -0.06% lost 0.3% to 6,658.71, while France’s CAC 40 index PX1, +0.49% picked up 0.2% to 4,368.86.
