European stocks advanced on the dovish tones coming from the Fed and SNB which both expressed reluctance to tighten monetary policy in the near future. Fed chairwoman Yellen said the Federal Reserve Board will take time before raising rates in a step that was more dovish than expected by the market. As the ECB sends its dovish signals and markets expect QE, SNB is getting ready to defend its 1.20 CHF per EUR peg by starting to charge for deposits.
Federal Reserve meeting and following press conference last night kicked off the monetary party as the chairwoman Yellen assured the market Fed will remain accommodative and the FOMC sees room to remain “patient” with the normalisation of rates. The FOMC sees inflation slowly returning to its 2% target despite falling oil and import prices. Fed governors and directors don’t see rates coming back in the “normal” long term level until 2017. The FOMC statement also said the Fed doesn’t see the need to begin normalisation in the next couple of meetings.
Swiss National Bank decided to lower the deposit rates to stop capital inflows from traders who are expecting weaker euro following ECB QE which many investment bank analysts see in the Q1 of 2015. SNB took notice and lowered the rate to minus 0.25% boosting European and Swiss stocks. Novartis AG and Roche Holding AG, advanced today boosted by the SNB action as the loose monetary policy is expected to lift future nominal incomes in the country. ABB Ltd rallied on the leadership change.
Stoxx 600, the broadest benchmark of european equities rallied 1.5 percent for the third day this morning in London, reaching 334 points. All groups climbed, lead by bank stocks. Raiffeisen Bank jumped more than 8 percent and ING Groep rose almost 3 percent. Turmoil seeds may be planted in Greece where Samaras didn’t manage to get votes to elect the president and this means early elections could be behind the corner allowing Syriza to take many places in parliament. Athens AEX slumped most since 1987 as the reminder of 2012 turmoil that started the second European recession since 2009.