Markets drop as ECB disappoints
European Central Bank President Mario Draghi gave with one hand and took away with the other on Thursday, first cutting the central bankâ€™s benchmark lending rate by 25 basis points and offering unlimited three-year loans to banks, then putting an end to speculation that the ECB would launch a bond-buying program.
TSX 11951.79 -1.62% -196.94
SP 500 1234.35 -2.11% -26.66
Dow 11997.70 -1.63% -198.67
Nasdaq 2596.38 -1.99% -52.83
Markets rallied on the interest rate cuts but dropped sharply when Draghi said statements he’d made last week, which led some to believe the central bank would buy more sovereign debt, had been misinterpreted.
The pessimism is coming from the fact that the ECB didn’t go any further on the possibility of buying debt Peter Jankovskis, a money manager at Oakbrook Investments in Lisle, Illinois, told Bloomberg.
They continue to do things to Band-Aid the banking sector, but they arenâ€™t getting at the fundamental issue here, which is that some of these underlying countries are nearing insolvency.
European Union leaders gathered Thursday night in Brussels for what French President Nicolas Sarkozy characterized as a last-chance summit to find a way to resolve the region’s sovereign-debt crisis. European media are reporting that those at the summit are vowing not to leave until a deal is reached.
Canadas benchmark stock index fell as the price of crude oil dropped $2.15 US to US$98.34 a barrel, and gold declined US$31.40 to US$1,713.40 an ounce.
The SP/TSX composite index dropped 196.93 points, or 1.62%, to 11,951.79, with nine of its 10 sub-indexes declining, led by materials, down 2.47%. Telecommunications was the sole gainer; it edged up 0.01 points after BCE Inc. announced it was raising its dividend for 2012 by five per cent. BCE shares closed at $40.60, up 1.05%.
The Dow Jones industrial average fell 198.67 points, or 1.63%, to 11,997.70 as once again concern about the eurozone overshadowed good domestic news , in this case, a report Thursday from the U.S. Labor Department that showed initial jobless claims for the previous week came in below expectations, a sign that the countryâ€™s labour market may be stabilizing.
The Nasdaq composite fell 52.83 points, or 1.99%, to 2,596.38. Canadaâ€™s junior Venture exchange lost 21.83 points, or 1.42%, to close at 1,517.38.
The Canadian dollar dropped sharply, closing at 97.79 US cents, a loss of 1.19 cents.
â€œThe realization gripped the market that it terms of liquidity, the central bank was there, but would do very little further in terms of funding or bond purchases that has weighed on risk assets as well as the Canadian dollar, Stewart Hall, senior currency strategist at Royal Bank of Canada in Toronto, told Bloomberg. The market is looking for some signs of a credible fence to cordon off the crisis, and it didnâ€™t get a heck of a lot from the ECB.
Here’s the news investors were watching today:
Odds of another financial crisis on the rise: Bank of Canada
Full coverage of Europeâ€™s crisis summit
National Bank posts higher profit, boosts dividend
BCE wows with triple whammy
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- Labor Productivity (Q3): Economists expect a decline of 0.3%
- Merchandise trade balance (Oct): Economists expect $700-million, down from the month before
- Goods and services trade balance (Oct): Economists expect a deficit of US$44-billion, up from the month before
- University of Michigan Consumer Sentiment Index (Dec): Economists expect a reading of 65.8
With files from Financial Post staff