Nov 6, 2014 9:11 AM
ECB's Draghi gives European stocks a big boost
The Associated Press
LONDON (AP) European stock markets surged Thursday while the euro tanked after European Central Bank President Mario Draghi said the bank is preparing the groundwork for further stimulus measures "if needed" for the struggling European economy.
KEEPING SCORE: From being largely flat, European stock markets were up strongly. Germany's DAX was up 1.4 percent at 9,444 while the CAC-40 in France rose 1.4 percent to 4,267. The FTSE 100 index of leading British shares underperformed its European peers largely because the U.K. is not in the eurozone. It was trading 0.5 percent higher at 6,568. Wall Street was poised for a solid opening with Dow futures and the broader S&P 500 futures up 0.2 percent.
DRAGHI CENTER STAGE: In his press conference following the ECB's decision to keep its main interest rate unchanged at the record low of 0.05 percent, Draghi said the ECB could engage in further unconventional stimulus measures, such as large-scale bond purchases to pump newly created money into the economy, if the economy worsens. The ECB has come under increasing pressure of late to provide a large monetary stimulus similar to that pursued by the U.S. Federal Reserve, to help shore up the European recovery and prevent prices from falling.
ANALYST TAKE: "Draghi has a tendency to cause hysteria in the markets even when he potentially doesn't mean to," said Craig Erlam, market analyst at Alpari. "It only takes the slightest suggestion that further easing is likely, or that QE is a possibility, and the markets go wild."
EURO HIT HARD: Draghi's comments had a big impact on the euro which fell from $1.2520 before he took to the stage to $1.2394.
JOBS REPORT: When Draghi leaves the stage, the focus will swiftly turn to the U.S. ahead of Friday's nonfarm payrolls report for October. The figures often set the market tone for a week or two after their release. A strong report on U.S. hiring from payrolls processor ADP suggested Friday's official data will show robust employment growth. If that is the case, it will allay lingering worries that the Fed's recent decision to withdraw its extraordinary stimulus, provided through a massive program of bond buying, was premature. Intended to spur economic recovery after the global recession, the stimulus helped markets defy gravity even in the face of poor company earnings or bad economic news.
THE QUOTE: "The market seems to have increased its conviction that we'll see a strong payrolls report on Friday," said Chris Weston, chief market strategist at IG.
ASIA'S DAY: Japan's Nikkei 225 stock average erased gains to end down 0.9 percent to 16,792.48 and Hong Kong's Hang Seng dropped 0.2 percent to 23,649.31 South Korea's Kospi added 0.3 percent to 1,936.48 and Australia's S&P/ASX 200 dropped 0.2 percent to 5,506.10. Markets in Southeast Asia were mostly higher.
ENERGY: Despite falling Thursday, oil prices remained above their multi-year lows hit earlier this week. The benchmark New York rate was down 76 cents at $77.92 a barrel. It swooned earlier in the week on reports that Saudi Arabia was cutting prices for U.S.-bound crude. On Wednesday, oil rebounded on a smaller-than-expected increase in overall U.S. supplies.