Draghi Helps Halt European Stock Sell-off; Oil Slips
Paris: European stocks settled following a sharp two-day slide as the European Central Bank renewed its pledge to keep monetary policy loose for a long time, while Brent crude slipped further on excess supply.
Bank President Mario Draghi said on Wednesday that policy would remain accommodative for as long as it takes to push ultra-low inflation in the euro zone back up closer to 2 per cent.
But with a weak German sentiment survey also in the mix, his renewed commitment was not enough to spur share market gains following this week's pull-back, and the leading FTSEurofirst 300 index edged down 0.05 percent in morning trade.
"Draghi just reaffirmed what he has said recently. It's positive, but won't be enough to really prevent stocks from drifting lower," Saxo Bank trader Andrea Tueni said.
"Following the string of sluggish macro data from Europe and China that we had this week, the stock market consolidation is probably not over yet."
Investors have been rattled by this week's worse-than-expected economic data from euro zone countries, including German and French business surveys.
Adding to concerns, data showed on Wednesday Germany's Ifo business sentiment index dropped for a fifth straight month in September to its lowest level since April 2013, dampening expectations for a strong third-quarter rebound in Europe's largest economy.
German bond yields inched lower following the data, further underlining the prospect of additional easing measures from the ECB.
The recent soft patch of economic indicators, coupled with a weak take-up of the ECB's new set of emergency loans last week, has increased chances that the central bank will have to resort to other measures to revive growth. "It provides a further signal of broad-based weakness in economic activity and raises pressure on policymakers to address this," said Lyn Graham-Taylor, a strategist at Rabobank.
Brent crude fell for a third day on Wednesday, with futures for November delivery down 12 cents at $96.73 a barrel, slipping further below $97 as inflated supplies and weak economic data from Europe outweighed rising political tensions in the Middle East.
London copper climbed away from three-month lows, although a looming oversupply of the metal kept its advance in check.
The dollar was kept in check on geopolitical concerns. The United States and its Arab allies bombed militant groups in Syria for the first time on Tuesday, opening a new front amid shifting Middle East alliances and sapping demand for riskier assets.
The air strikes in Syria fuelled demand for safe-haven government debt and pushed US Treasury yields lower, in turn halting the dollar's recent bull run.
The yen rose after Japanese Prime Minister Shinzo Abe voiced concern about the economic impact of the currency's fall to a six-year low, adding to the sense of a pause this week in the dollar's rise.
"It seems to us - and I think most people - that it's not the fact of the move, just the pace of it that Tokyo is concerned about," said a spot dealer with one large international bank in London.
"(But) it is not a surprise that we're seeing the yen show some resistance at the moment, given the slight pullback we've seen on the dollar in the last few days."
Copyright: Thomson Reuters 2014
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