European stock markets staged a solid rebound, finishing sharply higher in Wednesday trade, but still logged their steepest quarterly decline in four years.
The major equity benchmarks stayed in green territory even after eurozone inflation data showed consumer prices dropped in September.
The Stoxx Europe 600 index SXXP, +2.52% jumped 2.5% to end at 347.77, after shedding 2.9% over the last two trading days on concerns about China’s slowing economy.
“There’s nothing bullish out overnight to warrant [Wednesday’s] rise, just sellers and short sellers getting a little hesitant about hitting the button. Make no mistake, we’re heading lower; it’s just a case of when,” said Jonathan Sudaria, night dealer at London Capital Group, in a note.
He called Wednesday’s rally a “dead cat bounce,” which is a small, brief recovery in assets that have taken a recent beating.
Fears that the world’s second-largest economy is heading for a so-called hard landing has been a prevalent theme this quarter and has sent global equity markets sharply lower. The pan-European benchmark logged an 8.8% quarterly loss, the largest since the third quarter of 2011.
The following table highlights the main indexes monthly and quarterly performance:
Index Monthly change Quarterly change
Stoxx Europe 600 -4.3% -8.8%
FTSE 100 -3% -7%
CAC 40 -4.7% -7%
DAX 30 -6.2% -11.7%
Other indexes: Germany’s DAX 30 DAX, +2.22% ended 2.2% higher to 9,660.44 on Wednesday, while France’s CAC 40 index PX1, +2.57% was up 2.6% to close the session at 4,455.29.
The U.K.’s FTSE 100 index UKX, +2.58% rallied 2.6% to finish at 6,061.61.
Data: Eurozone inflation dipped to negative 0.1% in September from 0.1% in August, according to flash estimates from Eurostat.
The drop was widely expected after weak consumer-price data from Spain and Germany out on Tuesday. The European Central Bank is closely watching the weak price pressures in the region and ECB boss Mario Draghi has stressed the central bank is ready to boost its quantitative-easing program, if needed, to fight off deflation fears.
However, analysts doubted the weak September reading will be enough to get the ECB to launch more easing measures in the near-term.
“We expect the ECB to remain on hold at least until December and possibly until [the first quarter of 2016],” Pernille Bomholdt Henneberg, senior analyst at Danske Bank, said in a note.
“A trigger for an extension of the QE purchases beyond September 2016 could be a downward revision to the ECB’s inflation projection. Especially, core inflation is likely to undershoot the ECB’s projection as the ECB expects it to rise to 1.4% next year, which is very close to the historical average. In our view, this is very optimistic,” she added.
Late Tuesday, ECB Governing Council member Jens Weidmann said the eurozone’s economic recovery has firmed, unlike in January when the ECB was debating quantitative easing. “Worries about deflation, which were then exaggerated, have further dissipated,” he said.
Eurostat also said the eurozone unemployment rate was unchanged at 11% in August, having raised its July estimate from 10.9%.
In the U.K., the Office for National Statistics confirmed the British economy grew 0.7% in the second quarter, making it a top performer among advanced nations in the Group of Seven—second only to the U.S. However, year-over-year, gross-domestic-product growth was downgraded to 2.4% from 2.6%.
Movers: Shares of J Sainsbury PLC SBRY, +13.82% surged 14% after the U.K. supermarket chain said it expects profit to fall less sharply than expected in its current fiscal year.
Battered commodities giant Glencore PLC GLEN, +14.08% GLCNF, +12.36% 0805, +15.09% jumped 14% after the company in a statement reassured its “business remains operationally and financially robust.” The comments come after the shares plunged 29% on Monday on fears Glencore’s debt pile could wipe out its stock value.