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European Markets Rally Despite Grim Financial Future

7 years ago14 views

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European markets have taken a breather in Thursday trading. But EU Economic and Monetary Affairs Commissioner Olli Rehn says growth in the euro zone economy will come to a near standstill due to slower global growth.

European markets were up for a third straight session in early trading on Thursday.

The rise followed signs that euro zone leaders are committed to keeping Greece afloat.

The FTSEurofirst 300 got a lift of around one-and-a-half percent, while the DAX also started the day on the up.

Banking shares recovered after an initial dip, the result of a 2 billion dollar loss for UBS caused by rogue trader.

But investors are still nervous about the future and the European Commission's twice yearly outlook didn't help.

Commissioner Olli Rehn said the euro zone economy will come to a virtual halt by the end of the year.

[Olli Rehn, EU Economic and Monetary Affairs Commissioner]:
"Prospects are gloomier and risks to the growth outlook are tilted to the downside. Inflation in the EU is now expected to moderate faster than envisaged in the spring."

Rehn did say that overall euro zone growth for 2011 would still reach 1.6 percent - in line with the ECB's forecast.

[Olli Rehn, EU Economic and Monetary Affairs Commissioner]:
"Recovery's stalling in the second half of this year but we do not forecast a recession."

But investors are still wary - David Jones is from IG Index.

[David Jones, Chief Market Strategist, IG Index]:
"If you look back to where we were a month ago, we are just stuck in this massive sideways range, so I think day-to-day volatility will remain. I can't see markets having a sustained move in either direction."

Rehn also stressed euro zone budgets must be sustainable in order to get the economy back on track.

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