By Carla Mozee, MarketWatch Euro climbs; ruble extends slide vs.
dollar
LONDON (MarketWatch) -- European stocks turned sharply lower
while the euro climbed Thursday, after European Central Bank chief
Mario Draghi dashed hopes of a full-blow quantitative-easing
initiative launching this month.
The Stoxx Europe 600 dropped 1.3% to 344.84, marking its worst
percentage decline since mid-October. Bank stocks were hit hard and
the energy group lost more than 2%.
At a press conference, Draghi said the ECB's Governing Council
is preparing for the possibility of easing measures in early 2015,
but added that time frame doesn't imply any action will occur
around the bank's meeting in January. Read live blog of Draghi's
press conference.
"Just 20 minutes into the press conference, Draghi has deflated
the market," said Stephen Pope, managing partner at Spotlight
Ideas, in a note.
Rumors that the ECB might be preparing a broad-based stimulus
package for its January meeting, began floating late Thursday,
which began to push U.S. stocks modestly higher.
Ahead of Thursday's meeting, there was speculation Draghi would
announce the launch of sovereign-bond purchases, or at least
indicate it would consider introducing such action early in 2015.
In recent weeks, a string of weak economic data has turned up the
pressure on ECB policy makers to act to bolster inflation and
encourage growth in the eurozone.
"What does it take for this bank to act with a sense of
urgency[?]," asked Pope. "No wonder the eurozone will stay in
decline during 2015, as neither politicians or central bankers are
prepared to commence or carry on with the next round of heavy
lifting."
Shares of Spain's Bankia SA logged the worst loss of the day as
they fell 6%. National Bank Greece SA shares gave up 4.9%, Italy's
UniCredit SA fell 4.1% and Germany's Commerzbank SA ended 3.3%
lower.
In the energy group, Norwegian oil-services company Seadrill
Ltd. closed down 5.6%, French oil-services firm Technip SA shed
3.8% and U.K.-based oil and gas exploration company Tullow Oil PLC
fell 2.9%.
The euro (EURUSD) jumped to $1.2444, compared with $1.2317
before the start of the event. The euro late Wednesday traded
around $1.2311, at two-year lows.
The "short-covering bounce in the euro" came as the "sense of
urgency that Draghi (and European Central Bank Vice President Vitor
Constancio) had appeared to express in recent speeches did not seem
to be reflected in the press conference," said currency analysts at
Brown Brothers Harriman in a note.
Draghi said launching full-blown QE wouldn't require a unanimous
decision from the ECB's policy makers, and BBH noted there was a
"clear precedent for this" in other stimulus actions opposed by
Germany.
The ECB president also rebuffed a suggestion QE might be illegal
under EU laws covering the financing of member states' debt. "We
are convinced that a QE program that could include sovereign bonds
will fall within our mandate," Draghi said. "Not to pursue our
mandate would be illegal."
Holding to gains on Thursday, Ryanair Holdings PLC rallied 8.4%,
topping the Stoxx 600, after the budget carrier raised its
full-year profit forecast on strong figures from the November
period. TUI Travel PLC shares climbed 3.6% as the vacation-packages
company's fiscal 2014 underlying operating profit came in above its
recently raised outlook.
The Stoxx 600 on Wednesday marked its highest close since early
June by rising 0.6% to 349.34.
In other European markets, Germany's DAX 30 on Thursday fell
1.2% to 9,851.35, France's CAC 40 index lost 1.6% to 4,323.89, and
the U.K.'s FTSE 100 moved 0.6% lower to 6,679.37.
Also, Italy's FTSE MIB dropped 2.8% to 19,424.38, and Greece's
Athex Composite fell 1.6% to 991.87. Spain's IBEX 35 slumped 2.4%
to 10,619.90.
Meanwhile, the Bank of Russia said Thursday the slide in the
country's currency is posing a risk to financial stability, and
announced another step aimed at curbing the ruble's decline. The
ruble (USDRUB) gave up earlier gains, leaving the greenback to buy
54.278 rubles, compared with 53.038 rubles on Wednesday.
The ruble has dropped roughly 40% against the dollar this year.
Russian President Vladimir Putin in a speech to lawmakers and top
officials Thursday said the ruble has been subject to "speculative
attack" and called on officials to take action to discourage
further weakening.
Russian stocks lost 1.5%, leaving the MICEX index at
1,582.08.
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