Following recent dovish comments from ECB President Mario Draghi, markets had expected more aggressive measures including a larger cut in the deposit rate and perhaps even an increase in the monthly pace of asset purchases.
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HONG KONG (AP) Asian and European stock markets sank Friday as investors, disappointed by the ECB’s stimulus plan, hunkered down ahead of U.S.jobs data that will influence a Fed rate hike decision later this month.
Meanwhile warm weather in the U.S.is hurting demand for heating fuels like natural gas and heating oil. European shares shed earlier gains Thursday, Dec. 3, 2015 after the European Central Bank failed to cut a…
Denmark’s central bank was the first to respond when the ECB announced its bond buying program in January, cutting its key interest rate for the second time in a week on the day of the announcement and intervening on currency markets to prevent a strengthening of the krone. The tech-rich Nasdaq Composite Index held on to positive territory up a slight 0.06 percent.
US FOCUS: Investors are focused on an upcoming U.S.jobs report, which is expected to show unemployment holding steady at 5 percent and that 200,000 new jobs were added. In October, U.K. consumer prices were flat on the same month a year earlier, while prices in Switzerland were 1.2% lower, and prices in Poland were down 0.6%.
The Dow Jones industrial average gave up 251 points, or 1.4 percent, to close at 17,477.
Markets plunged in reaction with both Frankfurt’s DAX 30 and the CAC 40 in Paris ending the day down 3.58 percent, while London’s FTSE 100 index lost 2.27 percent.
“The euro’s adjustment higher is not yet complete and even a strong US payrolls number exceeding consensus should not put euro under meaningful pressure”, Morgan Stanley said in a note.
Draghi also announced Thursday cuts in euro area inflation expectations with the forecast for 2016 to reach 1.0 percent rather than 1.1 percent previously forecast. The S&P 500 rose 5.88 points, or 0.29 percent, to 2,055.50.
The latest initiative comes 11 months after the ECB decided, six years later than the US Federal Reserve and the Bank of England, to undertake quantitative easing.
“I think most currency traders were short the euro and long the dollar, expecting different commentary from chairman (Mario) Draghi”, said Michael James, managing director of equity trading at Wedbush Securities in Los Angeles. Its economy shrank in 2012 and 2013 and grew less than 1 percent previous year.
Stocks are opening slightly higher after the US government reported another solid month of job gains.
Probably. Rising U.S. rates will likely lure global investors into dollar-denominated Treasurys in search of higher returns.
Germany’s 10-year bund yield surged 20 basis points on Thursday to 0.67 per cent. The two-year yield climbed 13 basis points to minus 0.31 per cent after dropping to minus 0.454 per cent before the European Central Bank decision, the lowest level since Bloomberg began compiling data in 1990.
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“There’s absolutely no change to scenario for a weaker euro”, given the USA trajectory toward tightening and continued decline in crude-oil prices, said Nomura Securities chief foreign-exchange strategist Yunosuke Ikeda.
