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Euro shares mostly lower on Draghi comments; DAX down 0.45%

Published 07/05/2012, 12:41 PM
Updated 07/05/2012, 12:44 PM

Investing.com - European stocks closed mixed on Thursday, after the European Central Bank lowered its benchmark interest rate in order support euro zone economies, while Mario Draghi’s comments casted a bearish aura over the equity market.

At the close of European trade, the EURO STOXX 50 dropped 1.19%, France’s CAC 40 gave back 1.17%, while Germany’s DAX 30 fell 0.45%.

In a widely expected move, the ECB lowered interest rates to a record low of 0.75% from 1.00% to help bolster growth in the region, following a recent string of weak economic data.

Equity sentiment was hit after ECB President Draghi said that the economic outlook faces downside risks, adding that indicators for the second quarter point to weakening growth in the euro zone.

Draghi said that there was probably a "renewed weakness in economic growth" in the last three months, with "heightened uncertainty".

He also refused to speculate on the chances of a third round of Long Term Refinancing Operations, in which provides cheap loans to European banks in an attempt to encourage them to lend.

In Greece, new Finance Minister Yannis Stournaras said the Greek austerity program is off track in some respects, adding that international lenders have told him that he will meet some difficulties at a meeting of European finance ministers next Monday.

Stocks had found some support earlier, after China's central bank cut interest rates for the second time in two months in the latest attempt to bolster slowing growth in the world's second-largest economy.

Meanwhile in the U.S. positive U.S. employment data relaxed expectations for further monetary easing measures by the Federal Reserve.

The U.S. Department of Labor reported the number of individuals filing for initial jobless benefits in the week ending June 30 fell to a seasonally adjusted 374,000, compared to expectations for a decline to 385,000. The previous week’s figure was revised up to 388,000 from a previously reported 386,000.

The data came after payroll processing firm ADP said non-farm private employment rose by a seasonally adjusted 176,000 in June, easily surpassing expectations for an increase of 105,000. The previous month’s figure was revised down to a gain of 136,000 from a previously reported increase of 133,000.

A separate report showed that service sector activity in the U.S. grew at a slower rate than expected in June. The Institute of Supply Management said its non-manufacturing purchasing manager's index declined by 1.6 points to 52.1 in June from a reading of 53.7 in May.  

Analysts had expected the index to decline by 0.7 points to 53.0 in June.

Financial stocks erased earlier losses, as shares in French lenders Societe Generale and BNP Paribas surged 3.34% and 1.64%, while Germany’s Deutsche Bank and Commerzbank advanced 1.61% and 1.96% respectively. 

Elsewhere, Volkswagen remained one of the session’s top gainers, with shares soaring 7.02%, after agreeing to buy the controlling stake in Porsche’s automotive business for EUR4.46 billion, ending a seven-year takeover saga that divided two of Germany’s most powerful families.

Other European car makers tracked the company’s gains, as shares in Daimler advanced 1.38% and BMW jumped 1.29%, while Peugeot jumped 1.45%.

In London, the FTSE 100 bucked the down trend by climbing 0.14%, after the Bank of England increased its quantitative easing program by GBP50 billion and left interest rates unchanged.

GKN continued to lead gains, with shares skyrocketing 10.66%, after the engineering company announced that it had acquired Volvo Aero, the aero engine division of AB Volvo, for GBP633 million.

Mining giant Xstrata also contributed to gains, with shares climbing 3.92%, after it postponed a shareholder vote on its proposed merger with Glencore as it was forced to change the terms of a bumper retention package for top executives.

Meanwhile, energy stocks turned higher. Oil and gas major Anglo American jumped 2.39%, while BP saw shares rise 1.59%.

Financial stocks were broadly lower, on the other hand. Shares in the Royal Bank of Scotland plummeted 1.79% and Lloyds Banking dropped 0.98%, while Barclays and HSBC Holdings eased 0.07% and 0.03% respectively.

In the U.S., equity markets traded mixed with the Dow down 0.11%, the S&P 500 off by 0.28%, and the Nasdaq up by 0.11%.

In addition Thursday, Spain sold EUR2.997 billion of government bonds, in line with the full targeted amount of EUR3 billion, but at higher yields from last month.

The yield on Spanish 10-year bonds rose to 6.53% following the auction, re-approaching the critical 7%-level deemed as unsustainable in the long-term.

Traders are anticipating the U.S. nonfarm payrolls, German industrial production and Canadian Ivey PMI on Friday.




 

Latest comments

Draghi,,,, you're a stupid man,,,,,
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