BOUNCING BACK: Stocks plunged Thursday after investors were disappointed by the European Central Bank stimulus plans.
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In an attempt to reassure markets that the ECB has more firepower should inflation remain low, Mr Draghi said in NY on Friday that the central bank had “the power to act, the determination to act and the commitment to act”.
The 10 basis point cut to the deposit facility rate also failed to impress market participants and euro bears were caught off guard as the single currency rallied over 3% immediately after the release, its biggest one-day rally in six years, trading as high as 1.0981 against the dollar as traders hurriedly covered short positions.
On Thursday, the bank cut deposit rates further into negative territory – meaning lenders must pay to park cash with it and so look to loan more – and extended the length of its bond purchases.
Near mid-day in NY, the Dow Jones Industrial Average was down 0.17 percent, while the broad-based S&P 500 slipped 0.13 percent.
World stock markets churned lower Friday on lingering disappointment over “underwhelming” eurozone stimulus measures and ahead of key U.S. jobs data.
It is quite amusing, given all those post formal communications that European Central Bank would do whatever it must or in its power or even take measures to quickly bring back Euro Zone inflation close to European Central Bank target of below but close to 2%.
The biggest event for markets on Friday are U.S. nonfarm payrolls for November, the last major data point to come before the U.S. Federal Reserve meets on December 15-16 and could increase interest rates. Norfolk Southern said the offer was too low and that regulators probably wouldn’t approve it. Its stock lost $2.87, or 3.1 percent, to $90.24.
“The reaction we have seen could be a forewarning of what might transpire if the Fed doesn’t increase rates by a suitable margin or even fail to raise at all”, he said.
While the Fed is still widely expected to lift rates this month – for the first time in nine years – Yellen´s comments caused traders to baulk after a recent run-up in the dollar. The price of oil retreated on reports that OPEC won’t cut production.
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Missed goal The central bank’s mandate is for inflation of just below 2 per cent, a goal that it has missed substantially for the past two years when prices have risen by less than 1 per cent a year.
