Europe Markets

European markets close higher as ECB vows to ramp up bond buying

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Key Points
  • The ECB opted on Thursday to leave its Pandemic Emergency Purchase Program, or PEPP, unchanged, at a total of 1.85 trillion euros ($2.21 trillion) due to last until March 2022.
  • However, with purchases having been lower than usual in the first quarter, the central bank vowed to up the ante over the next few months.
  • European earnings came from Generali, Hugo Boss, Rolls-Royce, WPP, Morrisons and John Lewis Partnership.

LONDON — European stocks closed higher Thursday as the European Central Bank vowed to increase its bond buying amid rising borrowing costs on the continent.

The pan-European Stoxx 600 closed up 0.5%, with tech stocks jumping 2.3% and banks falling 1.6%.

Following its latest monetary policy meeting, the ECB said it expects to increase its bond purchases "significantly" next quarter, after borrowing costs rose in the region.

ECB in focus

The ECB opted on Thursday to leave its Pandemic Emergency Purchase Program, or PEPP, unchanged, at a total of 1.85 trillion euros ($2.21 trillion) due to last until March 2022. However, with purchases having been lower than usual in the first quarter, the central bank vowed to up the ante over the next few months.

Paul Diggie, senior economist at Aberdeen Standard Investments, said the markets had got what they wanted from the ECB, which will please policymakers as well.

"Both bond and equity markets were looking for the ECB to push back on the recent increase in European yields, which were looking like an unhelpful spill over of stronger growth prospects in the U.S.," Diggie said.

"By promising to increase the weekly run-rate of asset purchases under its QE program for the next quarter or so, the ECB did exactly that – literally putting its money where its mouth is."

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International markets had begun the session drawing on momentum from the U.S., after the House of Representatives passed the $1.9 trillion stimulus package, sending it to President Biden who is expected to sign the relief bill on Friday.

European earnings on Thursday came from Generali, Hugo Boss, Rolls-Royce, WPP, Morrisons and John Lewis Partnership.

WPP relaunched its buyback program after new client wins and cost cutting helped the advertising giant to stronger-than-expected full-year earnings in 2020. However, some analysts remain cautious on the company's outlook.

"The latest results from WPP may be in line with market expectations but ultimately they are still declining and are stuck in an environment that is less than friendly to traditional advertisers," said Ben Barringer, equity research analyst at Quilter Cheviot.

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In terms of individual share price action, French investment group Eurazeo jumped more than 9% to lead the Stoxx 600 after issuing a strong earnings report and positive outlook for 2021, while British housebuilder Persimmon fell 3.8%.

- CNBC's Silvia Amaro contributed to this report.

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