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Share markets get seven-year itch

Tuesday, March 03, 2015 - 02:09

European shares rise close to seven-year highs as better than expected German retail sales further buoyed investors days before the ECB kicks off a trillion-euro bond buying programme. After the Nasdaq's record high, David Pollard asks how long the good times will last?

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They say luck goes in cycles of seven years. Could it be changing for Europe's share markets? The highs seen in recent days - tops not seen since 2008 - come on a feel-good mix of better data - helping them keep up with and even outperform their US rivals. And an ECB QE programme finally getting under way. Simon Smith of FXPro. (SOUNDBITE) (English) CHIEF ECONOMIST AT FXPRO, SIMON SMITH, SAYING: ''QE has been good for other markets as investors sell bonds and put that money into other asset classes and that's they way central banks want to see it work, so that's why we've seen European markets have their own independent momentum.'' The latest numbers do cheer. Euro zone consumer prices fell by less than expected in February. Unemployment eased again in January - and German retail sales rose strongly. A triple dose of good news that, for once, eases fears that deflation will sink a recovery. The UK is toasting its own success story: strong manufacturing data pushing the FTSE to an all-time record, a whisker from an elusive 7,000 target. If the ECB delivers on its QE promises, more gains are to come, says Smith. Though perhaps only short-term. (SOUNDBITE) (English) CHIEF ECONOMIST AT FXPRO, SIMON SMITH, SAYING: ''The European Central Bank is coming to this quantitative easing programme much later than other central banks. But also, it's the fact that the dynamics of European markets are different. It's a much less equity-based culture than we see in the US, and for that reason, the expectation that investors will pile out of bonds, even though they're yielding very little, and sort of pile into equities, I don't think is as strong.'' Mario Draghi is likely to outline what the ECB calls the 'modalities' of QE at this week's key ECB meeting. In other words, the hows and whens of a one-trillion euros money printing plan. Just over half of economists polled by Reuters see it as potentially enough to return euro zone inflation to its target rate. But there are big 'ifs' to that thinking - like Greece - and the danger of it not securing enough bailout funding for its survival. Something that could yet spoil the party mood.

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Share markets get seven-year itch

Tuesday, March 03, 2015 - 02:09