Eurozone Stocks Drop Ahead of ECB Meeting


On Wednesday, stocks of the Eurozone pulled back before an ECB meeting that is likely to decrease market stimulus, while a stronger pound struck London’s FTSE 100.

In the third quarter, the GDP of Britain increased 0.4 percent outperforming expectations slightly.

The pound, which has been under fire over suggestions that an increase in interest rates may be delayed, spiked after the results of positive GDP, rising against the euro and the dollar.

However the increase in the value of the pound bring pressure on stocks, as numerous FTSE 100 firms have most of their earnings in terms of dollars, and a rebound in the pound will have adverse effects on profits once converted into sterling.

“Ultimately, a respectable growth rate in the UK economy will assist the equity benchmark in the long run, but for now the pound is putting pressure on it,” stated a market analyst at CMC Markets UK, David Madden.

Losses in the mining sector that was triggered partly by a sharp drop in the prices of copper overnight also weighed on the FTSE 100, which ended the day down almost 1.1%.

Eurozone stocks also decreased ahead of the policy meeting of the European Central Bank on Thursday, at which it is anticipated to announce a significant reduction in its bond-buying stimulus as the economy of the eurozone picks up.

Frankfurt dropped 0.5% to fall back below the 13,000 point level. Paris lost 0.4%%.

“Eurozone stock markets are selling-off ahead of the European Central Bank (ECB) meeting tomorrow,” stated Madden.

Analysts expect that the ECB will cut in half the volume of corporate and government bonds that it buys every month, from 60 billion to 30 billion euros, and extend the programme’s duration while promising to maintain interest rates at historic lows and keep the monetary tap open for longer in order to help financial markets adjust.