One thing’s for sure though, communication between the European Central Bank and the market could have been better given the sharp rally in the euro and the heavy selling seen across eurozone equity markets yesterday.
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In other markets, benchmark USA crude jumped $1.14, or 2.9 percent, to close at $41.08 a barrel on the New York Mercantile Exchange.
“The cut in the ECB’s deposit rate from -0.2% to -0.3% comes as a bit of a relief after incorrect last minute reports (by some media) that it had left rates unchanged”, said Jonathan Loynes, chief European economist at Capital Economics. Dow and S&P 500 futures were both up 0.2 percent.
The ECB cut its already negative deposit rate and extended the period over which it will buy government bonds by six months, indicating a further extension was possible if inflation doesn’t rise quickly.
Global bond yields shot up, with the US 10-year yield US10YT=RR rising to as high as 2.347 percent from 2.178 percent overnight. She added that while the bank might have to be cautious about increasing interest rates from near zero levels, the Fed fund rates would remain accommodative even after an initial increase.
Responding to reporters’ questions over possible future action and whether interest rates were now at their lower bound, Draghi said: “We are not going to be hampered in this by technical issues”.
Japan’s Nikkei.N225 tumbled 2.2 percent at the close, the biggest daily drop since September 29.
European shares were poised for further declines, with financial spreadbetters expecting Britain’s FTSE 100.FTSE to fall 0.6 percent, and France’s CAC40.FCHI and Germany’s DAX.GDAXI to open down 0.8 percent. European stocks went from 0.4 percent higher and nudging 3-month highs to 0.4 percent lower. The euro edged up to $1.0940 from $1.0939 after jumping 3 percent on yesterday’s news.
Because of this, the value of the Euro against the US dollar fell to just over $1.06 on Tuesday night.
While the Fed is still widely expected to lift rates later this month, Yellen’s comments caused dealers to ease off a recent run-up in the United States unit. “The market was prepared for bold action to tackle a real inflation problem in the euro area and the central bank showed it is not up to the task”, Erlam opined.
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“The ECB overshadowed today’s data point”, said Chris Gaffney, president of EverBank World Markets in St. Louis, in reference to the U.S.jobs data. On Thursday the Brent oil prices reached the $43.92 a barrel bouncing up from the 3-month low of $42.43 hit on Wednesday.
