CURRENCIES: The dollar strengthened to 113.81 yen from 113.22 yen while the euro fell to $1.1120 from $1.1178.
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The ECB’s negative outlook, where it lowered the eurozone’s growth outlook from 1.7 percent to 1.4 percent and inflation target from 1 percent to 0.1 percent, was one of the key factors that contributed to bringing down the European stock market, despite its unprecedented stimulus programs.
We find the ECB’s measures positive for risky assets as they, after all, are targeting the bank lending, credit channel and thereby economic growth rather than the currency channel, which is a zero-sum game.
Europe’s most powerful banker, 68, who has been at the ECB’s helm for four years, also said it was a priority for Europe to tackle chronic youth unemployment and reform a job market that locked out young workers.
Youth unemployment seriously harms the economy as it hampers labor participation and skill development and lead to more social problems and ill-health in the long run, European Central Bank President Mario Draghi said.
The bank’s steps on most counts exceeded expectations among analysts, suggesting the bank was determined to have an impact and avoid the market disappointment to its December 3 meeting, when it was seen as having done less than it could have.
The central bank also committed to buying up more bonds as well as expanding its quantitative easing (QE) programme to also include, for the first time, investment-grade corporate debt.
The Dow Jones industrial average was up about 180 points, or 1.0%, just before 11 a.m. ET.
At 1014 AEDT, the benchmark S&P/ASX200 index was down 3.5 points, or 0.07 per cent, at 5146.6 points.
The ECB’s policies have driven market interest rates below zero as well, pushing investors into a topsy-turvy world in which they are expected to pay for the privilege of loaning someone else money.
Sceptical Germans, the biggest opponents of European Central Bank policy easing, quickly jumped on Draghi, arguing that the side effects of the stimulus could spoil the gains.
Markets initially cheered the package but reversed course after Draghi hinted the ECB was done cutting rates and ruled out a tiered deposit rate structure – a system of multiple rates already used in Switzerland and Japan to encourage lending to companies while also punishing banks that hold too much cash. South Korea’s Kospi edged up 0.1 percent to 1,971.41 and Hong Kong’s Hang Seng index was up 1.1 percent to 20,199.60.
The biggest fallers in the FTSE 100 Index were Marks and Spencer Group down 8.6p to 398.1p, Old Mutual down 3.3p to 182p, Randgold Resources down 35p to 6325p, Shire down 7p to 3778p.
“It’s OK. As we’re still higher it is good”, Galliker said. The contract finished 45 cents lower at $37.84 a barrel.
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U.S. Treasury yields rose in choppy trading as investors bet the U.S. economy was healthy enough for the Federal Reserve to raise interest rates this year.
