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European Stocks Rise After ECB Raises Growth Outlook, Oil Prices Claw Back Gains

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European equity benchmarks were advancing on Friday morning as oil prices gained traction and after the European Central Bank (ECB) raised its economic growth projections through 2019 and said that it would carry on with its bond purchases at least through December.

West Texas Intermediate crude oil, the main US benchmark, was 0.4% higher at $45.84 per barrel while Brent crude, the international gauge, was up by the same amount at $48.06 per barrel at the time of writing. The gains follow two days of losses for both benchmarks after government data released on Wednesday showed a surprise increase in US inventories of crude oil last week, bringing an eight-week run of declining stockpiles to an end.

The ECB, which sets monetary policy across the 19 countries that share the euro, said on Thursday that economic growth is expected to be 1.9% this year compared with an earlier 1.8% forecast and it expects it to be 1.7% in 2019 from an earlier estimate of 1.6%. It confirmed that it would continue with its asset purchase scheme, at least through December, which sees the central bank buying 60 billion euros ($67.04 billion) of bonds each month, and also lowered its inflation projections.

The bank now sees inflation this year at 1.5%, down from a March forecast of 1.7% and its sees the pace of price increases rising to 1.6% in 2019, down from an earlier estimate of 1.7%. The ECB maintained its target for an inflation rate at just below 2%.

Also feeding into trading sentiment was the outcome of Britain's general election, which resulted in a hung parliament, with Prime Minister Theresa May's Conservatives losing their majority. The lack of a clear winner dragged down the pound, which recently traded 0.7% lower versus the dollar, at $1.27, in turn helping the exporter-heavy FTSE 100 index post gains.

"FTSE investors embrace fresh GBP weakness following a hung parliament result from the UK election," Mike van Dulken, head of research at Accendo Markets, said by e-mail. "Whilst this means uncertainty about the UK economy and of course Brexit negotiations, the index's international exposure means it benefits from a FX translational standpoint."

Van Dulken added that the prospect of a coalition government could result in softer terms of departure from the European Union, known as Brexit, than the Conservatives had been planning.

In equities, gold miners Fresnillo and Randgold Resources climbed by 4.4% and 2.3%, respectively, in London, while luxury goods retailer Burberry Group gained 2.2%. Drinks maker Diageo rose 1.8% and industrials led gains in Frankfurt, with Heidelberg Cement gaining 2.5% and BASF rising 1.3%. Utilities RWE and EON fell 1.4% and 1.1%, respectively. Aircraft parts manufacturer Airbus and hypermarket operator Carrefour each gained 1.6% in Paris while car parts maker Michelin added 1.2%.

The pan-European Stoxx 600 Index was 0.1% higher, London's FTSE 100 Index added 0.7%, Frankfurt's DAX was up by 0.5% and Paris' CAC-40 was 0.6% higher at the time of writing.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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