European Shares set to rise on ECB, China stimulus hopes

Last Updated: Mon, Mar 31, 2014 06:46 hrs

European stocks were seen opening slightly higher on Monday, adding to last week's strong gains, helped by speculation the European Central Bank could ease policy while China might take steps to stimulate its economy.

At 0615 GMT, futures for Euro STOXX 50, for UK's FTSE 100, for Germany's DAX and for France's CAC were up around 0.2 percent.

All eyes will be on the euro zone inflation figures, due at 0900 GMT on Monday. A surprise fall in inflation for Spain and Germany on Friday raised pressure on the ECB to take additional measures to ward off the threat of deflation.

Annual inflation in the euro zone has been in what ECB President Mario Draghi has called the "danger zone" below 1 percent for five months. The ECB has a policy meeting on Thursday.

"With the downward trend of disinflation looking fairly solid, and the threat of deflation just around the corner, another weak number will fuel speculation that the ECB will have to start firing off bazookas, possibly as early as this Thursday's meeting," Capital Spreads trader Jonathan Sudaria wrote in a note.

Italian banks will be in focus on Monday after the head of Italy's banking association ABI said the country's banks will not require any state funds as a result of the ECB's stress tests this year.

Speculation of fresh stimulus measures in China also helped lift the mood. Premier Li Keqiang sought to reassure markets that Beijing was ready to support the cooling economy, saying the government had the necessary policies in place and would push ahead with infrastructure investment.

The euro zone's blue-chip Euro STOXX 50 index has gained 6.9 percent since a low hit in mid-March, and is just a few points shy of its 2014 high hit in late January, at 3,176.99. If it breaks above it, the index would be trading at a 5-1/2 year high.

"The index should cross its 2014 high this week, with a target of 3,400 points on the upside. The buying pressure is intensifying, and the momentum is strongly bullish," Aurel BGC chartist Gerard Sagnier said.

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