ECB inaction weighs on European stocks but boosts euro

AP News
Posted: Sep 08, 2016 8:11 AM
ECB inaction weighs on European stocks but boosts euro

LONDON (AP) — European stock markets dipped Thursday while the euro struck two-week highs against the dollar after the European Central Bank left its key interest rates unchanged and decided against extending the duration of its bond-buying stimulus program.

KEEPING SCORE: In Europe, France's CAC-40 was down 0.4 percent at 4,541 while Germany's DAX fell 0.6 percent to 10,690. The FTSE 100 index of leading British shares was 0.2 percent higher at 5,859. U.S. stocks were poised to open flat, with Dow futures and the broader S&P 500 futures down 0.1 percent.

ECB WATCH: The decision by the ECB to keep policy unchanged wasn't a huge surprise but some in the markets had been hoping there would have been an extension to the stimulus program. Investors are waiting to hear what ECB President Mario Draghi says about the outlook at his upcoming news conference. The central bank faces stubbornly low annual inflation of only 0.2 percent despite pumping 1 trillion euros ($1.1 trillion) in newly printed money into the banking system through bond purchases since March, 2015. The purchases, made at a rate of 80 billion euros a month, are set to continue at least through March, 2017 or until inflation convincingly picks up. Draghi could indicate Thursday that the bank is ready to extend the bond-buying program.

EURO SOLID: Europe's single currency maintained its firm tone after the decision, trading 0.5 percent higher at a two-week high of $1.13. More stimulus could have weighed on the currency as traders price in the possibility of more euros in circulation for longer.

ANALYST TAKE: "The ECB's decision today to leave policy on hold as had been broadly expected reflects the reasonably positive tone of recent economic data, but we think that it will need to announce further policy stimulus before long," said Jennifer McKeown, senior European economist at Capital Economics.

CHINA TRADE: Imports rose in August for the first time since late 2014, while a contraction in exports narrowed in a positive sign for global economic growth. Imports expanded by an unexpectedly strong 1.5 percent, up from July's 12.5 percent plunge. Exports fell 2.8 percent but that also was better than forecast and an improvement over the previous month's 4.4 percent contraction. The improvement was a positive sign for Chinese leaders who are trying to protect millions of trade-supported jobs. The import gain suggested lackluster Chinese domestic demand might be firming up.

ASIA'S DAY: Japan's Nikkei 225 index fell 0.3 percent to 16,958.77 and Sydney's S&P-ASX 200 fell 0.7 percent to 5,385.80. The Hang Seng index in Hong Kong gained 0.8 percent to 23,919.34 points and the Shanghai Composite Index rose 0.1 percent to 3,095.95. Seoul's Kospi added 0.1 percent to 2,063.73, while India's Sensex rose 0.3 percent to 29,006.18.

ENERGY: Benchmark U.S. crude rose 68 cents to $46.18 per barrel in electronic trading on the New York Mercantile Exchange. Brent crude, used to price international oils, rose 59 cents to $48.56 in London.