European stocks rally as QE effect kicks in


European stock markets rose following the first rounds of bond purchases this week, both the CAC40 and the Eurostoxx jumped by more than 1%, while the Dax30 reached another record level of 11702.80, marking a 1.7% increase compared to the previous day.

It is the third time since the beginning of the year that the German indicative stock market index has reached a record increase, starting on January 22 and followed by another record on February 17.

Meanwhile, the Euro traded at a 12 year low against the dollar, reaching $1.0692, raising expectations that the two currencies would soon reach parity.

Yet concerns mount that the aggressive ECB stimulus could lead to further financial imbalances, particularly in Germany.

Jeremy Lawson, Chief Economist at Standard Life comments: “House prices have risen more than 5% over the past 12 months in Germany and 22% since early 2010 according to Europace data, in stark contrast to stagnant prices before the crisis.

“Rising real incomes and extraordinarily low lending rates provide strong incentives to borrow and invest at present. From a financial stability perspective, it is crucial that this borrowing is directed towards productive uses and the underwriting of this credit remains robust” he adds.

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