By Sara Sjolin, MarketWatch
LONDON (MarketWatch) -- European stock markets ended mixed on
Monday, with French equities dropping right before the close as the
country's prime minister resigned, while a larger-than-expected
drop in euro-zone inflation reignited deflation fears and kept
investors on edge.
The Stoxx Europe 600 index rose 0.2% to close at 334.31, coming
off its intraday high of 335.94. For the quarter, the benchmark
ended 1.8% higher, marking the third quarterly advance in a
row.
The index was lifted by a solid gain for Novartis AG (NVS), up
3.5% after the drug maker said it will close its trial of a
heart-failure drug early because of the strength of the results so
far.
Also pushing higher, ING Groep NV gained 2.8% after the Dutch
bank said it will resume paying dividends in 2015.
More broadly, euro-zone consumer-price data were the main event
in Europe on Monday. Inflation fell to 0.5% in the currency union
in March, below analysts' expectations and marking the lowest level
since late 2009. Economists worry the euro zone may be heading for
deflation, which could put the region's fragile economic recovery
at risk. This has raised calls for the ECB to either cut rates or
launch new easing measures at its meeting on Thursday.
Meanwhile, the euro (EURUSD) has steadily increased against the
dollar, recently touching its highest level since 2011. That has
further added pressure on the ECB to loosen policy.
ECB President Mario Draghi has consistently reassured listeners
that the euro zone isn't heading for deflation, but that the
central bank stands ready to act if needed. Howard Archer, chief
U.K. and European economist at IHS Global Insight, called the
inflation data "uncomfortable and unwelcome news for the ECB" and
said the decision on Thursday will be a close call.
"However, the general impression we get from ECB officials'
comments is that the they don't believe circumstances warrant
policy action at this stage, and we still think it is more likely
than not that the ECB will sit tight," he said.
Data out on Friday showed Spain fell into deflation in March, as
high unemployment and weak demand for goods among households and
businesses added pressure on consumer prices.
Among country-specific indexes, France's CAC 40 index sold off
just before the close and ended down 0.5% at 4,391.50 as Prime
Minister Jean-Marc Ayrault resigned after his Socialist Party
suffered major losses in local elections over the weekend. French
President François Hollande will make a televised statement on
Monday evening, according to media reports. For the quarter, the
CAC rose 2.2%.
Most stocks fell in the Paris benchmark, with Danone SA down
1.6% and heavyweight oil firm Total SA (TOT) 0.9% lower.
The U.K.'s FTSE 100 index ended 0.3% lower at 6,598.37,
extending its quarterly loss to 2.2%.
Germany's DAX 30 index dropped 0.3% to 9,555.91, but ended the
quarter marginally higher.
The German benchmark was earlier in the day helped higher by a
stronger-than-expected report on retail sales for February.
In the U.S., stocks traded higher after Federal Reserve
Chairwoman Janet Yellen said the Fed's "extraordinary" support for
the economy will last "for some time to come." A gauge of
Chicago-area businesses tumbled in March, dropping to the lowest
level since August to 55.9, which is a 3.9-point fall from
February.
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