By Sara Sjolin, MarketWatch
LONDON (MarketWatch) — European stock markets on Monday extended last week’s rally as news reports signaled the region’s leaders were prepared to take new steps to curb the debt crisis, including buying government debt.
The Stoxx Europe 600 index XX:SXXP +1.15% rose 0.9% to 262.23, adding to a 0.6% gain from last week, which marked an eighth consecutive week of gains.
“The markets are still looking for some coordinated action and the rhetoric lately points to that. There’s a scope for something to be announced from the ECB on Thursday,” said Richard Perry, chief strategist at Central Markets.
Last week, European Central Bank President Mario Draghi pledged to do “whatever it takes” to save the euro. The promise later gathered support from German Chancellor Angela Merkel and French President François Hollande, who vowed to do “everything possible to protect the euro zone.”
“But you could say that we have already priced in central-bank action. We also have PMI data out on Wednesday, which may not be great, and [U.S.] nonfarm payrolls numbers out on Friday, so we may find most gains in the front end of the week,” Perry added.
Air France-KLM, banks rise
Shares of Air France-KLM FR:AF +13.79% surged 14%, as the airline reported a 895 million euros ($1.1 billion) second-quarter loss due to one-off charges, but said it expects an improvement in the back half of the year. See: Charges push Air France-KLM deeper into the red.
Shares in outdoor-advertising firm JCDecaux SA FR:DEC -8.74% sank 8.3% after the French-based company reported a drop in first-half profit. It further said it doesn’t expect an improvement in the third quarter. See: JCDecaux doesn't see Europe ad improvement in third quarter.
France’s CAC 40 index FR:PX1 +0.52% added 0.4% to 3,292.95, as BNP Paribas SA FR:BNP +3.53% rose 3.5% and Credit Agricole SA FR:ACA +5.47% climbed 5%.
Bank shares rose along with hopes that European policy makers would act to curb the region’s sovereign-debt problems. The head of the Eurogroup, Jean-Claude Juncker, said in an interview with Sueddeutsche Zeitung, that the euro-area countries, the rescue fund and the European Central Bank would soon act to save the shared currency. He also indicated that the European Financial Stability Fund and the ECB would buy Spanish government debt to rein in high borrowing costs. See: Juncker says ECB, rescue fund will act to save euro.
On Thursday, the ECB will release its policy decision, with expectations increasingly pointing toward further easing measures. The U.S. Federal Reserve will also announce its policy decision this week. U.S. stocks pointed to a mixed open on Wall Street, after a strong rally last week.
On the data front for the euro zone, the European Commission said its July sentiment indicator for the currency area fell to 87.9 from 89.9 in June, coming in below expectations. See: Euro-zone July economic sentiment index falls.
Need for action
Perry from Central Markets said that we need firm action from policy makers in order to see a sustainable improvement in financial markets.
