Investing.com - European stocks remained higher on Monday, as expectations for further easing measures by the European Central Bank strengthened after ECB President Mario Draghi said the bank saw a risk of a deflationary cycle taking hold in the euro zone.
During European afternoon trade, the DJ Euro Stoxx 50 gained 0.82%, France’s CAC 40 rose 0.34%, while Germany’s DAX jumped 0.90%.
Draghi said the ECB is ready to act should it see signs of a negative inflation spiral taking hold, and indicated that the bank is weighing a wide range of policy options, including interest rate cuts, and liquidity injections or broad-based asset purchases to help shore up the fragile recovery in the euro area.
"What we need to be particularly watchful for at the moment is the potential for a negative spiral to take hold between low inflation, falling inflation expectations and credit, in particular in stressed countries," Draghi said.
"There is a risk that disinflationary expectations take hold," prompting consumers and businesses to delay spending. "We are not resigned to allowing inflation to remain too low for too long," he added.
The comments were made at the new ECB annual conference in Sintra, Portugal.
European equities have been gaining ground since the ECB indicated at its May 5 meeting that it is comfortable with easing monetary policy as soon as its next meeting in June, to tackle low levels of inflation in the region.
Financial stocks were mixed, as BNP Paribas (PARIS:BNPP) dipped 0.02% and Societe Generale (PARIS:SOGN) rose 0.22% in France, while Germany's Deutsche Bank (XETRA:DBKGn) slipped 0.13%.
Peripheral lenders remained broadly higher however, Italy's Intesa Sanpaolo (MILAN:ISP) and Unicredit (MILAN:CRDI) surged 3.50% and 3.62% respectively, while Spain's Banco Santander (MADRID:SAN) and BBVA (MADRID:BBVA) gained 0.64% and 0.67%.
Elsewhere, French technology services company Atos (PARIS:ATOS) rallied 5.08% after it offered to buy rival Bull (PARIS:BUL) for about €620 million to create a European leader in cybersecurity and cloud computing.
Alstom (PARIS:ALSO) added to gains, up 0.40%, as General Electric (NYSE:GE) pledged to keep the power-equipment maker’s nuclear operations in France, if it gets the French government's approval for its $17 billion bid to buy the company's energy division.
Trade volumes were expected to remain thin on Monday with U.K. markets closed for a public holiday and markets in the U.S. remaining shut for the Memorial Day holiday.