By Tommy Stubbington
European stocks remained lower Thursday and the euro was steady
after the European Central Bank held interest rates at record
lows.
The Stoxx Europe 600 was 0.5% lower, deepening their recent
decline, after the ECB left all its benchmark rates unchanged--as
widely expected by investors.
This week's losses in equity markets were sparked by Wednesday's
weaker-than-expected economic data in the eurozone, including an
unexpected contraction in Germany's manufacturing sector.
Investors are now looking to the ECB to shore up the eurozone's
shaky recovery, although most think Thursday's news conference,
which starts at 1230 GMT, will be too soon for fresh action given
September's announcement of unexpected interest rate cuts and a
program to buy private-sector debt.
"We expect the ECB to reveal details today of its new
asset-purchase program, with no change to policy at this juncture,"
said Barclays analysts.
"However, under our scenario of still weak economic activity and
inflation in the coming months, we expect the ECB to ease policy
further and extend the scope of asset purchases to government bonds
by the beginning of 2015," they said in a note to clients.
U.S. stocks had stumbled Wednesday as the selloff spread to Wall
Street, pulling the S&P 500 1.3% lower. Futures contracts
indicated a 0.1% gain for the index at Thursday's open. Changes in
futures aren't necessarily reflected in market moves after the
opening bell.
In Asia, Japan's Nikkei dropped 2.6% as a stronger yen
exacerbated investors' concerns.
Expectations of further ECB measures have weighed on the euro in
recent weeks, and the currency was steady against the dollar after
the rate announcement at $1.2637, not far above the two-year low
hit earlier this week.
The euro's relatively mild reaction to Wednesday's disappointing
data could point to further losses for the currency, according to a
note to clients from Citigroup.
"This is healthy for the greater move lower. I think the market
is underestimating [ECB President Mario] Draghi's ability to be
dovish during this meeting," said a Citigroup currency trader in
London.
Bonds in the eurozone have also been boosted by hopes of further
ECB action. German 10-year yields traded at 0.91% Thursday, not far
above August's all-time low of 0.86%. Yields fall as prices
rise.
In commodities markets, gold was 0.2% lower at $1,213.90, and
Brent crude oil was 2.1% lower at $92.20 a barrel.
Write to Tommy Stubbington at tommy.stubbington@wsj.com