A man walks down steps under a share price ticker at the London Stock Exchange in the City of London. The benchmark FTSE 100 index yesterday rose 0.43% to stand at 6,685.26 points ahead of British growth data to be released today.

AFP/London

European stock markets rose yesterday after poor German and French growth data fuelled speculation that the European Central Bank would be forced to roll out stimulus measures.

Frankfurt’s DAX 30 index added 0.29% to close at 9,225.10 points, while in Paris the CAC 40 gained 0.25% to 4,205.43.

London’s benchmark FTSE 100 index rose 0.43% to stand at 6,685.26 points ahead of British growth data to be released today.

Given figures that showed the German and French economies grinding to a halt, “we still believe that the ECB needs to implement further policy action—probably in the form of full-scale quantitative easing—to try to bring the euro down and re-ignite the recovery,” Capital Economics’ chief European economist Jonathan Loynes commented.

The German economy, Europe’s biggest, stalled in the second quarter owing to weaker exports and falling investment, which cast a cloud over recovery in the crisis-battered eurozone.

German gross domestic product (GDP) contracted by 0.2% in the period from April to June, following growth of 0.7% in the preceding three months.

Collapsing growth in key eurozone economies pushed investment funds into the safety of German bonds, causing the rate on the reference Bund to briefly fall below 1.0% for the first time ever.

In midday trading in New York, US stocks posted modest gains, with the Dow Jones Industrial Average up by 0.25% to 16,692.68.

The broad-based S&P 500 gained 0.29% at 1,952.35, while the tech-rich Nasdaq Composite Index rose 0.25% to 4,445.37.

In foreign exchange trading, the euro edged up to $1.3374 from $1.3363 late on Wednesday in New York, as traders reacted to a forecast of higher eurozone inflation.

The European single currency climbed to 80.14 pence from 80.06 pence on Wednesday, while the pound was stable at $1.6690.

On the London Bullion Market, the price of gold rose to $1,313.50 an ounce from $1,312 on Wednesday.

The European Central Bank said yesterday that eurozone inflation has “more or less” reached a trough and will start moving higher again in the next few years.

Low and weak inflation is a concern because it carries the risk of outright falling prices, known as deflation, which deters consumers from spending in the belief they can wait and buy more cheaply later.

Despite the euro’s gains, the single currency “continues to gradually weaken in the near-term, undermined by the deteriorating outlook for economic growth in the eurozone,” said Lee Hardman, an analyst at the Bank of Tokyo-Mitsubishi.

The British pound steadied after sliding on Wednesday as the Bank of England hinted that markets may have to wait longer than they thought for a long-awaited hike to its main interest rate.

With the BoE set to sit tight as low wage inflation offsets strong British output and falling unemployment, “an interest rate rise in 2014 and perhaps even the first quarter of 2015 appears a distant hope at present,” said Jameel Ahmad, chief market analyst at foreign exchange brokers FXTM.