By Sara Sjolin, MarketWatch
LONDON (MarketWatch) -- European stock markets traded in tight
ranges on Thursday, as investors were hesitant of making any major
moves ahead of the highly anticipated European Central Bank meeting
later in the day.
The Stoxx Europe 600 index was marginally higher at 343.65, but
swung between small gains and losses.
The subtle moves came as most of Europe was waiting for the ECB
to reveal its latest interest-rate decision. The bank is widely
expected to cut interest rates and take the deposit rate into
negative territory for the first time in euro-zone history, in an
effort to spur growth and fight off worryingly low inflation. Most
economists predict the central bank will also launch a package of
liquidity measures to boost bank lending, which has been weak
recently. Read: How to invest if the ECB cuts rates below 0%
The decision is out at 12:45 p.m. London time, or 7:45 a.m.
Eastern Time, followed by a news conference with ECB President
Mario Draghi at 1:30 p.m. London time.
Draghi -- the modern monetary Caesar
Economists at UBS called Draghi the "modern monetary Caesar" and
said anything less than a 15 basis-point rate cut could disappoint
the market. The main refinancing rate currently stands at a record
low of 0.25%, and the deposit rate is at 0%.
"Draghi is dressing the move as deflation defiance," the UBS
economists said in a note. "The move will not impact disinflation
directly, of course -- but the reaction of the currency markets is
very relevant."
The strong euro (EURUSD) has been cited as one of the reasons
euro-zone inflation is stuck around a four-year low and monetary
easing could weaken the currency. Since Draghi hinted at the ECB's
May policy meeting at upcoming stimulus measures, the shared
currency has been steadily declining from almost $1.40, to around
$1.36. Ahead of the meeting on Thursday, the euro traded at
$1.3617, a touch higher than recorded on late Wednesday.
Index moves
Europe's equity benchmarks were trading in tight ranges ahead of
the rate call. Germany's DAX 30 index fell 0.1% to 9,918.93, while
France's CAC 40 index rose 0.1% to 4,503.60. The U.K.'s FTSE 100
index dropped 0.3% to 6,800.22.
The Bank of England releases its monetary decision on Thursday
as well, but is -- unlike the ECB -- widely expected to keep its
key lending rate at a record low 0.50% and make no changes to its
375 billion-pound ($628 billion) asset-purchase program. The BOE
decision is out at noon in London, or 7 a.m. Eastern Time.
Among movers in Europe, shares of Volvo AB lost 2.4% after UBS
cut the truck maker to sell from neutral.
Shares of BHP Billiton PLC (BHP) dropped 0.7% after RBC Capital
Markets shifted its preference within the mining space from BHP to
Rio Tinto PLC (RIO).
In data releases on Thursday, Eurostat said euro-zone retail
sales in volume terms rose 0.4% in April, compared with March.
Year-on-year, retail sales improved 2.4%, marking the strongest
annual growth rate in seven years.
Meanwhile, the Ukraine-Russia standoff remained in the
spotlight, as Western leaders gathered in Brussels for the second
day of the Group of 7 (G7) summit that kicked off on Wednesday.
U.S. President Barack Obama and European leaders warned the Kremlin
they will introduce tougher economic sanctions if Russia doesn't
stop the violence in eastern Ukraine.
More must-reads from MarketWatch:
Could the euro face a short squeeze after the ECB?
A stock-market prediction that's 'kind of scary'
U.K.'s economy is still vulnerable: BOE official
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