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Hot Topic Scrutiny Week
Hot Topic Scrutiny Week
2 mins to read

While you were sleeping: ECB rate cut, US jobs surprise


Stocks on both sides of the Atlantic gain, pushing the Standard & Poor's 500 Index to a record high.

Margreet Dietz
Wed, 11 Jul 2018

Stocks on both sides of the Atlantic gained, pushing the Standard & Poor's 500 Index to a record high, after the European Central Bank reduced borrowing costs, while US unemployment claims posted a surprise decline.

And Warren Buffett, the 82-year-old billionaire, sent his first tweet-and then promptly attracted followers at an initial rate of about 1000 a minute.

The key news was the ECB dropping its deposit rate to a record low 0.5 percent from 0.75 percent after policymakers met today – and a hint it was open to the idea of a negative rate – to help stem further deterioration in the eurozone economy.

The region's manufacturing output shrank in April for a 21st consecutive month, according to Markit Economics data.

"The cut in interest rates should contribute to support prospects for a recovery later in the year," ECB president Mario Draghi says in a statement. "Against this overall background, our monetary policy stance will remain accommodative for as long as needed."

Europe's benchmark Stoxx 600 Index ended the session with a gain of 0.3 percent from the previous close on Tuesday. Key national stock indexes also rose in Paris, London and Frankfurt, adding 0.1 percent, 0.2 percent and 0.6 percent, respectively.

"The fashion right now for all central banks is to help the economy with a lot of money, and this will go on, and this will lead equity markets higher," Herbert Perus, who helps oversee $US36 billion as head of equities at Raiffeisen Capital Management in Vienna, told Bloomberg.

Yesterday, US Federal Reserve policy makers signalled an ongoing commitment to their programme of buying $US85 billion of bonds a month to fuel the pace of the recovery. The Fed continues to link its pace of asset buying to the nation's jobless rate.

In afternoon trading in New York, the Dow Jones Industrial Average gained 0.82 percent, the Standard & Poor's 500 Index climbed 0.92 percent, while the Nasdaq Composite Index rose 1.31 percent. The S&P 500 touched a record 1598.60 earlier in the session.

Labor Department figures today showed that the number of applications for unemployment insurance payments dropped by 18,000 to 324,000 in the week ended April 27.

The surprise decline came hot on the heels of yesterday's disappointing ADP National Employment report. All eyes are now government payrolls report later today. Economists' polled by Reuters predict employers hired 145,000 people last month, while the unemployment rate remained steady at 7.6 percent.

The latest US earnings also gave rise to optimism. Shares of Facebook climbed, last up 5.3 percent, as did those of General Motors, last up 3.6 percent, and Visa, last up 5.9 percent, amid results that surpassed expectations.

Of the 381 companies in the S&P 500 that have reported results so far, 73 percent exceeded analysts' earnings predictions while 53 percent missed on sales, according to Bloomberg.

(BusinessDesk)

Margreet Dietz
Wed, 11 Jul 2018
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While you were sleeping: ECB rate cut, US jobs surprise
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