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Options traders and investors are rediscovering their taste for European stocks.
Mario Draghi and his European Central Bank colleagues may move a step closer to full-scale quantitative easing when they meet tomorrow in Frankfurt. That hope spurred investors to send money to a fund tracking the region?s equities for the first time in five months.
Sentiment has reversed since October, with options to buy European shares costing the most in more than four years relative to bearish puts, data compiled by Bloomberg show. Investors who had avoided peripheral markets such as Portugal, Italy, Greece and Spain are ready to resume buying on prospects Draghi will enact more stimulus, according to Lars Kreckel at Legal & General Investment Management.
?There?s clearly more optimism now,? said Kreckel, LGIM?s London-based global equity strategist. ?As long as Draghi can keep the hope alive that the ECB is moving closer to doing sovereign QE, that?s enough for this week?s meeting. European equities have done quite well in the past few weeks but QE is still not yet fully priced into the market.?
Germany?s DAX Index in November led European equities to their best month since February. ECB Vice President Vitor Constancio echoed President Draghi last week, saying that the central bank will consider buying sovereign debt if existing stimulus proves insufficient. The majority of economists surveyed by Bloomberg News predict the ECB will eventually buy government bonds.
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