FRANKFURT, Germany (AP) â€” The latest developments on the day the European Central Bank is expected to announce a further stimulus for the 19-country eurozone economy. All times local:
The early reaction in European stock markets to the European Central Bank's decision to cut a key interest rate has been negative.
p>Aberdeen Asset Management Investment Manager Patrick O'Donnell said the ECB's decision to cut the rate on deposits from commercial banks from minus 0.2 percent to minus 0.3 percent will "underwhelm" markets. Many had predicting a cut to minus 0.4 percent.
The negative rate is intended to push banks to lend excess cash by imposing a penalty for leaving it at the central bank's super-safe deposit facility.
Europe's main stock markets shed earlier gains. Germany's DAX was down 0.2 percent while the CAC-40 in France was flat. And the euro was up 0.6 percent at $1.0674 following the decision, a clear indication that traders expected a bigger rate cut.
The ECB said it further monetary policy decisions will be announced shortly by President Mario Draghi.
The European Central Bank has announced a cut in one of its key interest rates in an attempt to stimulate lending & assist a modest economic recovery.
The bank reduced the rate on deposits from commercial banks from minus 0.2 percent to minus 0.3 percent. The negative rate is intended to push banks to lend excess cash by imposing a penalty for leaving it at the central bank's super-safe deposit facility.
The rate cut is moreover seen as likely to weigh on the euro's exchange rate against other currencies. That would assist exporters & thus support the modest recovery in the 19 countries that use the euro as their currency.
The ECB moreover said it will announce further measures at a news conference after by President Mario Draghi.
With investors predicting a bold package of stimulus measures from the European Central Bank later, there is a risk that it fails to meet expectations & that could see the day's stock market gains evaporate & the euro rise.
Michael Hewson, chief market analyst at CMC Markets, cautioned that it's "highly improbable" that ECB President Mario Draghi will deliver everything that many investors expect it to & cautioned that the outcome of the policy meeting "is more than likely to disappoint."
However, Craig Erlam, senior market analyst at OANDA, argues the opposite is the case.
The ECB under Draghi, he said, has a "history of exceeding market expectations when it comes to monetary stimulus & I expect the same to happen again today."
Investors appear to be expecting bold action from the European Central Bank after in the day.
Stock markets across Europe are markedly higher â€” Germany's DAX & France's CAC-40 are up approximately 0.9 percent in late morning trading. The euro is moreover down 0.5 percent at $1.0555, a further indication that traders think ECB President Mario Draghi will announce a substantive package of stimulus measures.
Most economists expect the ECB to make it more expensive for commercial banks to park their cash at the central bank â€” cutting the so-called deposit rate further into negative territory â€” & to extend & swell its current 1.1 trillion-euro ($1.2 trillion) government bond-buying program.
James Hughes, chief market analyst at GKFX, says Thursday could be "a pivotal day" for the euro & says that parity between Europe's single currency & the dollar â€” last seen in late-2002 â€” is possible shortly especially as the Federal Reserve is expected to raise interest rates after this month.
Official figures show that retail sales across the eurozone remain sluggish despite the boon offered to consumers by cheap oil & subdued consumer price gains.
The European Union's statistics agency says retail sales slipped by 0.1 percent in October from the previous month. That's the second straight 0.1 percent decline & suggests that a rise in consumer demand earlier in the year may have run its course. October's weakness was largely due to declines in Europe's top two economies, Germany & France.
On an annual basis, Eurostat said retail sales were 2.5 percent higher in October, down from September's rate of 2.9 percent.
A closely watched survey suggests that the economic recovery across the eurozone is getting stronger yet that price gains remain subdued.
Financial information company Markit says its purchasing managers' index â€” a broad gauge of activity across the manufacturing & services sector â€” rose to 54.2 points in November from 53.9 the previous month. Anything above 50 indicates expansion.
Markit says that the rates of expansion in output, new orders & employment all accelerated to be at, or close to, the fastest for 4 Â½ years. It moreover says backlogs of work suggest that solid growth may continue at the end of the year.
However, the survey shows that the faster growth is not fueling inflation. Low levels of inflation are the primary reason why the ECB is expected to announce new stimulus after Thursday.
Source: “Associated Press”