Stocks remain firm after ECB keeps rates on hold

AP News
Posted: May 03, 2012 8:05 AM
Stocks remain firm after ECB keeps rates on hold

European stocks remained firm Thursday after cash-strapped Spain got through another set of bond auctions unscathed and the European Central Bank kept interest rates unchanged.

The Spanish Treasury said it raised (EURO)2.52 billion ($3.3 billion) in 3- and 5-year bonds, slightly above the target range of (EURO)1.5 billion to (EURO)2.5 billion. However, it did have to pay more to investors to part with their cash, in a sign that the country's economy remains a concern.

The auctions came ahead of the monthly ECB meeting, which took place this time in Barcelona. As expected, the ECB kept its benchmark interest rate at the record low of 1 percent. Investors are now awaiting the post-meeting press conference of ECB president Mario Draghi to see what he says about the state of the eurozone economy and what policy tools, if any, the bank has at its disposal to kickstart growth.

"The apparent 'conflict' between fiscal austerity on one hand and economic growth on the other seems likely to feature prominently," said Mark Miller, European economist at Capital Economics. "Attention is likely to focus on whether Draghi will give any hints that the ECB might be willing to provide further support for the region's economy."

The pressure on Europe's policymakers to come up with measures to boost growth has grown over the past few weeks. Even Draghi has spoken of the need for a "growth compact" alongside the "fiscal compact" governments agreed earlier this year to keep their budgets under much tighter control.

Polls suggest that Francois Hollande will defeat Nicolas Sarkozy in this Sunday's presidential election and that may lead to a different emphasis in Europe's ongoing struggle to deal with its debt problems.

Ahead of Draghi's press conference, stocks were solid in Europe. The FTSE 100 index of leading British shares was up 0.6 percent at 5,795, while Germany's DAX rose 1.1 percent to 6,782. The CAC-40 in France was 1.4 percent higher at 3,271.

Wall Street was poised for a solid opening, with both Dow futures and the broader S&P 500 futures 0.2 percent higher.

Outside of Europe, investors will be keeping a close watch on the next round of U.S. economic data later in the day, which includes the monthly non-manufacturing survey from the Institute for Supply Management. A stronger than anticipated manufacturing report on Tuesday helped the Dow Jones industrial average close at its highest level in nearly five years.

Weekly jobless claims figures will also feature as traders position themselves for Friday's closely-watched nonfarm payrolls data, which often set the market tone for a week or two after their release. A weak private payrolls survey from ADP on Wednesday dampened expectations over Friday's official government data.

Trading in the currency markets was subdued with the euro 0.1 percent lower at $1.3130.

Earlier in Asia, Hong Kong's Hang Seng fell 0.3 percent to 21,249.53, a day after posting strong gains. But mainland Chinese shares edged higher, with the benchmark Shanghai Composite Index up 0.1 percent at 2,440.08 and the Shenzhen Composite Index gaining 0.6 percent to 961.99. Markets in Japan were closed for a public holiday.

Oil prices slipped slightly, with the benchmark New York rate down 40 cents at $104.82 a barrel.


Pamela Sampson in Bangkok contributed to this report.