Euro tumbles as ECB comes up short; U.S. jobs eyed
The euro slid for a second straight day against the dollar in volatile trade on Thursday after European Central Bank President Mario Draghi quashed expectations of immediate action to remedy the region's debt crisis. Investors had high hopes headed into the ECB meeting after Draghi last week fueled speculation of further bank purchases of Italian and Spanish bonds when he said he would do "whatever it takes to preserve the euro."
But Draghi sent no signal of near-term action. Instead, he said the ECB will draw up plans in the coming weeks to make outright purchases to stabilize euro zone borrowing costs. Investors will now focus on Friday's U.S. non-farm payrolls report, which could create another day of volatile trading. At a press conference after the ECB's decision to keep interest rates at 0.75 percent, Draghi said the ECB would only act after euro zone governments have activated bailout funds to do the same and any intervention would depend on troubled countries making a request and accepting strict conditions and supervision.
The euro <EUR=> last traded at $1.2154, down 0.6 percent. Against the yen, the euro slid as low as 94.90 and last traded down 0.8 percent at 95.12 yen <EURJPY=>. It also hit a record low against the Australian dollar around A$1.1600.
Wall St takes a hit from ECB disappointment
U.S. stocks fell for a fourth day on Thursday after European Central Bank President Mario Draghi disappointed investors hoping for immediate action to contain the euro zone debt crisis. One of Wall Street's top market makers, Knight Capital Group <KCG.N>, was fighting for its survival after a trading glitch that roiled markets on Wednesday wiped out $440 million of the firm's capital. However, the market focused mostly on the ECB, though traders were also looking ahead to Friday's closely watched U.S. jobs report which could bring a volatile end to an eventful week.
Draghi said the ECB would gear up to buy Italian and Spanish bonds on the open market but would only act after euro zone governments have activated bailout funds to do the same, disappointing traders after his pledge last week to do "whatever it takes" to save the euro left many thinking action was imminent.
Markets rallied late last week in part on hopes for stimulus from the Federal Reserve but mostly as expectations grew the ECB would take action to protect the euro. Friday's jobs report could give a stronger indication whether the Fed, which has a freer hand than the ECB, will act shortly. Data showed the number of Americans filing new claims for jobless benefits rose last week and manufacturers suffered an unexpected drop in orders in June, suggesting the economy is struggling to break out of a soft patch.
The Dow Jones industrial average <.DJI> fell 92.18 points, or 0.71 percent, to 12,878.88. The S&P 500 Index <.SPX> dropped 10.14 points, or 0.74 percent, to 1,365.00. The Nasdaq Composite <.IXIC> lost 10.44 points, or 0.36 percent, to 2,909.77. Major indexes fell for a fourth day running, totaling weekly losses so far of more than 1.5 percent.
Oil Drops as Draghi Stops Short of Detailing Bond Plan
Crude fell in New York after European Central Bank President Mario Draghi failed to give details of a plan designed to shore up the euro by curbing rising government borrowing costs in the region. Futures tumbled 2 percent after Draghi signaled that the ECB will join forces with governments to buy sovereign bonds in sufficient quantities to remove all doubts about the future of the euro. Draghi said last week he would do whatever it takes to protect the currency, stoking speculation he would outline plans following a central bank meeting today.
Oil for September delivery fell $1.78 to settle at $87.13 a barrel on the New York Mercantile Exchange. Prices have declined 12 percent this year. Brent crude for September settlement slipped 13 cents to $105.83 a barrel on the London-based ICE Futures Europe exchange. The European benchmark contract traded at a premium of $18.70 to New York-traded West Texas Intermediate, the steepest since May.
ECB bond purchases would probably focus on shorter-term maturities, would be conducted in a way to soothe investors’ concerns about seniority, and wouldn’t breach European Union rules prohibiting the financing of government deficits, Draghi told reporters in Frankfurt. ECB officials are working on the plan and details will be fleshed out in coming weeks, he said. The central bank earlier kept the benchmark interest rate on hold at 0.75 percent.
Gold down, hopes for imminent cenbank actions fade
Gold prices fell for a fourth straight session on Thursday as bullion investors continued to unwind bullish bets due to a lack of more aggressive actions by the European Central Bank and U.S. Federal Reserve to boost growth.
ECB President Mario Draghi said any government bond buying would not come before September - and only if governments activated the euro zone's bailout funds to join the ECB in buying bonds. Gold fell in tandem with losses on Wall Street and U.S. crude futures, as markets across the board looking for monetary stimulus were less than impressed. Just last week, Draghi said the ECB would do whatever it takes to preserve the euro.
The bullion market was already under pressure a day after the Federal Reserve issued a policy statement that dashed investor hopes for new monetary stimulus, even though it acknowledged that the U.S. economy has lost momentum.
Spot gold <XAU=> fell 0.8 percent to $1,585.75 an ounce by 2:29 p.m. EDT (1829 GMT), having earlier hit a one-week low of $1,587.80. U.S. COMEX gold futures <GCZ2> for December delivery settled down $16.60 an ounce at $1,590.70, with trading volume around 10 percent below 30-day average, preliminary Reuters data showed.
Nikkei set to fall on ECB disappointment
Japan's Nikkei share average is set to open lower on Friday as investors were disappointed that European Central Bank chief Mario Draghi did not match his last week's pledge to do whatever it takes to defend the euro with immediate action. Draghi indicated after the ECB policy meeting that any intervention would not come before September - and only if governments activated the euro zone's bail-out funds to join the ECB in buying bonds.
The Nikkei <.N225> was likely to trade between 8,500 and 8,600, strategists said. The benchmark inched up 0.1 percent on Thursday to 8,653.18, meeting resistance at 8,687.93, the 50 percent retracement of its rally from June 4 to July 4. Nikkei futures in Chicago <0#NIY:> closed at 8,565 on Thursday, down 0.8 percent from the Osaka <JNIc1> close of 8,630.
On Thursday, the broader Topix <.TOPX> index added 0.4 percent to 732.98. The index has fallen 6.3 percent since hitting a two-month high on July 4 due to concerns over a deepening euro zone debt crisis, spluttering growth in the United States and China, and weaker company earnings. Fifty-five percent of the 111 Nikkei companies that have so far reported quarterly earnings missed market expectations, according to Thomson Reuters StarMine. That compared with 40 percent in the previous quarterly earnings season.
Seoul shares seen posting steep decline as ECB disappoints
Seoul shares may fall sharply when the market opens on Friday after the European Central Bank disappointed investors who were hoping for immediate measures to fight the euro zone debt crisis. ECB chief Mario Draghi said the bank was drawing up plans to ease surging borrowing costs in Spain and other indebted countries through direct bond purchases but the move, likely a few weeks away, underwhelmed market participants who were hoping for more immediate action. The Korea Composite Stock Price Index (KOSPI) <.KS11> fell 0.6 percent to close at 1,869.40 points.
Hong Kong shares set for second straight loss, 200-day MA in focus
Hong Kong shares are set for a second straight loss on Friday after European Central Bank chief Mario Draghi failed to match his pledge last week to do "whatever it takes" to defend the euro with any immediate action.
Draghi indicated after the ECB policy meeting that any intervention would not come before September - and only if governments activated the euro zone's bail-out funds to join the ECB in buying bonds. The Hang Seng Index <.HSI> is likely to dip back below its 200-day moving average on Friday, currently at about 19,677.2, a technical level it has struggled to stay above since mid-May.
The benchmark index closed down 0.7 percent on Thursday, but is still up 2.1 percent for the week.Elsewhere in Asia, Japan's Nikkei <.N225> was down 1.3 percent, while South Korea's KOSPI <.KS11> was down 0.9 percent at 0055 GMT.
Source : Reuters
