Eurozone economy creaking into life

European stock markets rallied today as Eurostat reported the eurozone economy grew 0.3% during the fourth quarter of 2014 and was 0.9% up year on year.

Eurozone economy creaking into life

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Germany’s DAX was up 59 points to 10,980 in late morning, France's CAC 40 rose 30 points to 4754, while Spain’s IBEX 35 put on a punchy 156 points to reach 10,725.  

Markets appeared to be taking the news as an indication that a corner may have been turned even before ECB sovereign QE kicks in.

“This is the latest in a series of signs that the economic climate might be improving, and the European Central Bank’s quantitative easing programme might therefore benefit from a following wind,” said Hargreaves Lansdown senior economist Ben Brettell.  

“Most notably the credit cycle appears finally to be showing improvement – after two and a half years of contraction, euro zone bank lending to the private sector is growing again,” Brettell added.  The jury is still out on the effectiveness of QE. One thing we do know is that it is likely to boost stock markets, but its effects on the economy are less clear.”

Europe’s largest economy was unsurprisingly a big factor in the improved numbers.

“Reports of the death of the eurozone economy have been greatly exaggerated. GDP figures from across the currency union were much better than expected,” said IG markets analyst Chris Beauchamp.

“Germany fulfilled its traditional role as the engine of growth, with a quarter-on-quarter improvement of 0.7%, more than double expectations. France also conformed to type, with 0.1% growth steady for a second quarter, a veritable Gallic shrug of indifference. Having stormed back yesterday, stock markets across the continent moved higher, with the DAX touching the magic 11,000 level for the first time,” said Beauchamp.

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