Breaking News
0

Euro craters, stocks jump as ECB holds off on rate hikes

ForexJun 14, 2018 12:54PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. Traders work on the floor of the New York Stock Exchange shortly after the opening bell in New York

By Nick Brown

NEW YORK (Reuters) - European stocks jumped more than 1 percent on Thursday, while the euro cratered against the dollar, after the European Central Bank indicated it would not raise interest rates through the summer of 2019.

The bank's unexpectedly dovish guidance on interest rates overshadowed its statement that it aimed to wrap up its crisis-era stimulus program, quantitative easing, at the end of this year.

The ECB now plans to reduce monthly asset purchases between October and December to 15 billion euros until the end of 2018 and then conclude the program, though ECB President Mario Draghi stressed that the governing council stood ready "to adjust all its instruments as appropriate."

Investors, though, seized on comments indicating that interest rates would stay at record lows at least through the summer of 2019.

Some analysts believe it could be even longer.

"With Draghi's term of office due to expire at the end of October 2019, we feel the ECB is unlikely to start increasing interest rates until the new ECB president is firmly in place," said David Zahn, head of European fixed income for Franklin Templeton.

Ten-year government bond yields in Germany, the euro zone benchmark, fell around four basis points to 0.43 percent (DE10YT=RR).

The euro, meanwhile, touched on its steepest one-day drop against the U.S. dollar since June of 2016, while the dollar accelerated to a two-week peak.

The euro (EUR=) was last down 1.37 percent to $1.1628, while the dollar index, which measures the greenback against six top currencies, (DXY) rose 0.85 percent.

EQUITIES STRONG

European equities rose sharply after initial losses, with Wall Street creeping into positive territory.

The pan-European FTSEurofirst 300 index (FTEU3) rose 1.40 percent, buoyed by big gains in interest rate-sensitive sectors like autos and utilities.

"The hawks had been guiding for a June hike before the (ECB) meeting and, given the clear guidance the ECB gave today on interest rates, it had to be priced out," said AFS Group analyst Arne Petimezas. "It doesn't seem like we're at the stage where the hawks are on top of things."

MSCI's gauge of stocks across the globe (MIWD00000PUS) shed 0.05 percent, while Wall Street wavered, with two of the three main indexes up after better-than-expected May retail sales data.

The U.S. Commerce Department reported that retail sales rose 0.8 percent last month, the biggest advance since November 2017. Data for April was also revised upward.

The Dow Jones Industrial Average (DJI) fell 7.94 points, or 0.03 percent, to 25,193.26, the S&P 500 (SPX) gained 7.6 points, or 0.27 percent, to 2,783.23 and the Nasdaq Composite (IXIC) added 62.69 points, or 0.81 percent, to 7,758.39.

MSCI's broadest index of Asia-Pacific shares outside Japan (MIAPJ0000PUS) closed 1.11 percent lower, while Japan's Nikkei (N225) lost 0.99 percent.

Benchmark 10-year U.S. Treasury notes (US10YT=RR) last rose 8/32 in price to yield 2.9516 percent, from 2.979 percent late on Wednesday.

The 30-year bond (US30YT=RR) last rose 21/32 in price to yield 3.0696 percent, from 3.102 percent Wednesday.

TRADE TENSIONS

One issue keeping investors in check was concern about U.S. threats to impose tariffs on $50 billion of Chinese goods. U.S. President Donald Trump was planning to meet with trade advisers later to decide whether to activate the tariffs, a senior administration official said on Wednesday.

CBOT corn and soybean futures were down sharply as uncertainty about tariffs and favorable crop weather in the U.S. Midwest have prompted funds to liquidate big long positions.

CBOT July corn <1CN8> fell to its lowest since mid-January and front-month soybeans dipped to a 9-1/2 month low. Traders are worries about China, Mexico and other countries curbing demand for U.S. grain and soy exports.

Another event markets were gearing up for: the start of soccer's World Cup in Russia, where time zone differences mean there will be more matches during European or U.S. and Latin American trading hours than any previous tournament.

A study done during the last World Cup with similarly-timed games, the 2010 finals in South Africa, showed trading volumes on share markets dropped by a third on average when matches were on and 55 percent when a market's own team played.

Oil prices were down, facing pressure from evidence of rising U.S. output and uncertainty over supply, before a meeting next week of the world's largest exporters.

U.S. crude fell 0.3 percent to $66.44 per barrel and Brent was last at $75.95, down 1.03 percent on the day.

Euro craters, stocks jump as ECB holds off on rate hikes
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email