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 central bank 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
