London - Europe's main stock markets got a boost on Thursday as the ECB pledged to further ease monetary conditions if necessary and hinted at quantitative easing to keep deflation at bay.
The CAC 40 in Paris jumped 0.77 percent in value compared with Wednesday's closing values to reach 4,464.78 points in afternoon trading, while Frankfurt's DAX 30 rose 0.50 percent to 9,671.31 points.
London's FTSE 100 index added 0.17 to stand at 6,670.67 points in afternoon trading.
As expected, the European Central Bank kept its gunpowder dry again, holding its key “refi” interest rate at an all-time low of 0.25 percent for the fifth month in a row.
However ECB chief Mario Draghi later told journalists the bank “remains resolute in our determination” to keep monetary conditions in the euro area accommodative and will “act swiftly” if necessary.
“We do not exclude further monetary easing,” he added.
A BOOST NEEDED
Although the ECB's interest rate has been near zero for some two years, with inflation dipping close to outright falls in inflation and growth remaining slugging, analysts have been looking for the central bank to cut it further or take other steps to boost the economy.
Draghi said the ECB was prepared to use not just conventional monetary policy tools such as interest rates, but also non-standard measures as well, including QE.
“Super Mario again proves he is a master wordsmith by shaking up financial markets with rhetoric about talk at the ECB over the possibilities of employing unconventional easing measures including QE,” said market strategist Ishaq Siddiqi at trading firm ETX Capital.
The idea of central bank purchases of government debt, the main monetary stimulus tool used by the US Federal Reserve and Bank of England to counter the global financial crisis, has been controversial in Europe.
QE is anathema to Germany as Berlin sees it as financing of government deficits which is against the ECB's charter.
Draghi downplayed the threat of dangerous deflation for the eurozone, and indicated that the strong euro was also an important factor in the eurozone's current ultra-low inflation rate of 0.5 percent.
EURO HURTING EXPORTS
“The exchange rate is very important for price stability,” said Draghi, adding however that it is “not a policy target”.
The strong euro makes imported goods are cheaper, and European businesses have also complained it has hurt exports and thus recovery.
The comments helped send the euro sliding to $1.3748 from $1.3765 late on Wednesday in New York.
The dollar stood at 103.99 yen after reaching a 2.5-month high of 104.07 yen in Asian trading hours, which compared with 103.85 on Wednesday.
The European single currency fell to 82.81 British pence from 82.80 pence, while the pound dropped to $1.6589 from $1.6622.
On the London Bullion Market, the price of gold retreated to $1,287.35 an ounce from $1,292 on Wednesday.
Meanwhile US stocks opened little changed Thursday with the Dow Jones Industrial Average climbing 0.13 percent to 16,595.29 points after five minutes of trading.
The broad-based S&P 500 edged up 0.08 percent to 1,892.50, while the tech-rich Nasdaq Composite Index slipped 0.02 percent to 4,275.45.
Commerce Department data showed the US trade deficit for February jumped to $42.3 billion from $39.3 billion in January. Meanwhile, US jobless claims last week increased 16,000 to 326,000.
Asian stock markets meanwhile mostly rose on Thursday following another record close on Wall Street as US private jobs growth picked up, but Shanghai gave up early gains despite China unveiling a mini stimulus programme.
Global shares have enjoyed a broad rally this week following upbeat manufacturing data in key economies, while investors are keenly awaiting the release of a US non-farm payrolls report on Friday.
On the corporate front, shares in Kingfisher grew 2.5 percent to 441.90 pence after Europe's biggest home-improvements chain said that it was in exclusive talks to buy Mr Bricolage to build upon Kingfisher's already strong presence in France.
British group Kingfisher, which owns French home-improvement chains Castorama and Brico Depot as well as B&Q in Britain, said terms of a proposed deal valued Mr Bricolage at about 275 million euros ($378 million), including debt.