World stocks gyrate on ECB news and China trade
BEIJING - 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.
At around 8 a.m. Easter, France’s CAC-40 was down 0.3 percent at 4,544 points, and London’s FTSE 100 ticked up 0.2 percent to 6,860. Germany’s DAX fell 0.5 percent to 10,698. Each had been higher earlier in the morning but reversed after the ECB latest monetary policy announcement.
On Wednesday, the CAC 40 and DAX each rose 0.6 percent, while the FTSE 100 gained 0.3 percent. On Wall Street, the future for the Dow Jones industrial average slid 0.1 percent and that for the Standard & Poor’s 500 was basically flat.
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.
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.
“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.
Earlier, Asian markets mostly rose and Europe’s were higher, before reversing on the ECB news, after China reported that imports rose in August for the first time since late 2014. And a contraction in exports narrowed in a positive sign for global economic growth.
Chinese 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.
Investors have been looking ahead to the ECB’s policy meeting for signs of when it might raise euro zone interest rates. As forecasters had expected, the bank kept its policy on hold following the ECB’s comment in its July review that it needed to closely watch the impact of Britain’s vote to leave the 28-nation trading bloc. Inflation is well below the bank’s target, with consumer prices barely changed this year.
“Global equities have been climbing to a 12-month high recently, and are showing signs of fatigue,” said Bernard Aw of IG in a report. “Corporate earnings challenges aside, market participants will need a fresh catalyst for stocks to resume its bullish trajectory,” he said.
“This could come in the form of more stimulus from the ECB or BOJ, or a stronger consensus on the delay in U.S. rate hike for the rest of the year,” he added.
Japan’s Nikkei 225 index fell 0.3 percent to 16,950, and Sydney’s S&P-ASX 200 fell 0.7 percent to 5,386. The Hang Seng index in Hong Kong gained 0.8 percent to 23,919 points, and the Shanghai Composite Index rose 0.1 percent to 3,096. Seoul’s Kospi added 0.1 percent to 2,064, while India’s Sensex rose 0.3 percent to 29,006. Taiwan and New Zealand rose, while other benchmarks in Southeast Asia declined.
Benchmark U.S. crude rose 69 cents to $46.18 per barrel in electronic trading on the New York Mercantile Exchange. The contract gained 67 cents on Wednesday to close at $45.50. Brent crude, used to price international oil, rose 59 cents to $48.56 in London. It added 72 cents on Wednesday to close at $47.98.
The dollar edged down to 101.55 yen from Wednesday’s 101.71 yen. The euro rose to $1.1271 from $1.1241.