European stocks perk up on Draghi stimulus signal

GMT 16:46 2014 Thursday ,06 November

Arab Today, arab today European stocks perk up on Draghi stimulus signal

Europe's main stock markets
London - AFP

Europe's main stock markets shot up and the euro dropped on Thursday as Mario Draghi signalled that the ECB was readying further monetary stimulus measures if needed to combat deflation and stagnation.
London's benchmark FTSE 100 index picked up 0.38 percent to 6,503.71 points in afternoon trading, while Frankfurt's DAX 30 won 1.03 percent to 9,411.68 points and in Paris the CAC 40 gained 0.82 percent to 4,242.86.
European equities had been broadly steady after the ECB and Bank of England had announced, as widely expected, that they were keeping interest rates at record lows.
Analysts had also been expecting Draghi to say already announced measures should be allowed to make an impact, but amid growing calls for action he signalled the central bank stands ready.
"The governing council has tasked ECB staff and the relevant Eurosystem committees with ensuring the timely preparation of further measures to be implemented, if needed," Draghi told reporters.
Draghi's comments followed a call by the OECD to overcome its reluctance and undertake quantitative easing given the very weak state of the eurozone economy and the risk of damaging deflation as inflation is running at just 0.4 percent.
"This should include a commitment to sizeable asset purchases ('quantitative easing') until inflation is back on track," the OECD said, adding that the purchases could include government bonds, which the ECB has so far shunned due to political sensitivities in Europe about the central bank underwriting government spending.
Purchase of government bonds was the main element of the recently ended quantitive easing programme by the US Federal Reserve, and Japan last week stepped up its asset purchases in order to support growth.
The ECB has been focusing its monetary stimulus, designed to spur lending and investment by buying financial assets, on packages of loans known as asset-backed securities (ABS) and corporate bonds.
The ECB has said it could inject some one trillion euros ($1.25 trillion) into the economy in this manner.
Capital Economics Senior European Economist Jennifer McKeown had said before Draghi's announcement that the ECB chief might discuss additional asset purchases.
She said that "a supportive stance from Mr Draghi could boost confidence and prompt a further helpful depreciation of the euro in the meantime."
- Euro slumps -
The euro duly tumbled on Draghi's comments to $1.2418 from $1.2484 late in New York on Wednesday.
The euro has shed about 7 percent of its value against the dollar in the past six months.
The European single currency slid to 78.06 British pence from 78.15 pence. But the British pound slid to $1.590 from $1.5973 on Wednesday.
On the London Bullion Market, gold prices gained to $1,144.50 an ounce from $1,142 an ounce on Wednesday.
Wall Street stocks Thursday opened slightly higher following a solid report on US jobless claims ahead of Friday's major jobs report for October.
Five minutes into trade, the Dow Jones Industrial Average stood at 17,510.70, up 0.15 percent. The broad-based S&P 500 added 0.04 percent to stand at 2,024.31 while the tech-rich Nasdaq Composite Index rose 1.56 percent to 4,622.28.
Asian stock markets diverged on Thursday despite a strong lead from a record-high close on Wall Street as traders welcomed the Republican victory in Tuesday's US midterm elections.
Tokyo slipped 0.86 percent, giving up some of the more than 10 percent gained in the past week on the Bank of Japan's monetary easing announcement.
Sydney slipped 0.21 percent but Seoul rose 0.26 percent.
Shanghai added 0.27 percent but Hong Kong closed down 0.20 percent.


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