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Business / Stock Market

European stocks mixed amid Swiss fallout, ECB talk

Published: 16 Jan 2015 - 04:19 pm | Last Updated: 18 Jan 2022 - 01:32 am

 

 

London---European stocks diverged Friday amid fallout from the Swiss central bank's shock move to abandon its policy of weakening the franc, while traders readied for next week's pivotal ECB meeting.
The Swiss National Bank (SNB) came under fire after ending on Thursday a three-year bid to stop its currency strengthening beyond 1.20 against the euro -- a decision that sent the franc soaring and bankrupted several foreign exchange broker firms.
A brokerage in Britain and another in New Zealand declared insolvency Friday, while in Switzerland, exporters warned that they too could be put out of business after the franc surged.
In midday deals, London's FTSE 100 shares index was up a slight 0.06 percent at 6,502.69 points compared with Thursday's close.
Frankfurt's DAX 30 dipped 0.04 percent to 10,028.48 points and the CAC 40 in Paris won 0.31 percent in value to 4,336.40.
Switzerland's SMI shed 4.59 percent to 8,015.24 points.
The euro bought 1.0156 Swiss francs. On Thursday, the Swiss unit surged 30 percent to 0.8517 before ending the day at 1.0035, a gain of around 15 percent.
The SNB had been defending the exchange rate floor since September 2011 in an effort to protect the country's vital export and tourism industries, even buying massive quantities of foreign currencies to do so.
The rate was introduced as the eurozone crisis sent investors flocking to the haven currency. More recently, the Russian ruble crisis put renewed pressure on the franc.
But the bank, which less than a month ago vowed to enforce the exchange rate floor "with the utmost determination", said Thursday it was no longer needed.
- ECB awaits -
Focus was also firmly on the European Central Bank, which will decide on the scale of a planned sovereign debt purchase at next week's meeting, a board member said Friday, in the clearest sign that the ECB will launch the controversial stimulus measure.
"We will take the American and British experiences into account in order to determine the amount of debt to buy so as to reestablish confidence and bring inflation back to a level close to and lower than 2.0 percent," Benoit Coeure told the French newspaper Liberation.
It comes as official data on Friday revealed that inflation in Germany, Europe's biggest economy, slowed to just 0.2 percent in December, its lowest level in more than five years, and averaged 0.9 percent for the whole of 2014.
The chronically low level of inflation across the single currency bloc has fuelled concern the region could slip into deflation -- a sustained and widespread drop in prices. Britain too risks falling into deflation later this year.
While falling prices may sound good for consumers, deflation can trigger a vicious spiral in which businesses and households delay purchases, throttling demand and causing companies to lay off workers.
Such concerns have fuelled speculation that the ECB could launch a programme of sovereign bond purchases known as quantitative easing or QE when it holds its first policy meeting of the year next Thursday.
 

AFP