European Central Bank vice-president: The markets got it wrong
Inflation across the euro zone was still stubbornly low, standing at just 0.1% in November, far below the ECB’s target of just under 2%, he said.
The European Central Bank stepped up efforts Thursday to kickstart chronically low inflation in the euro area, cutting a key interest rate and extending its controversial asset purchase program, but financial markets reacted with disappointment.
Global stock markets sank Friday as investors, disappointed by the ECB’s stimulus plan, hunkered down ahead of U.S.jobs data that will influence a Fed rate hike decision later this month. The bank reduced the rate on deposits from commercial banks from a negative 0.2 per cent to a negative 0.3 per cent. The negative rate is meant to push banks to lend excess cash by imposing a penalty for leaving it parked at the central bank’s super-safe deposit facility.
The Standard & Poor’s stock index fell by thirty points on Wednesday, and European stock markets all showed substantial declines.
It’s possible that Draghi-and investors-underestimated the roadblocks thrown in the ECB’s way by the Governing Council’s hawks, said Carsten Brzeski, economist at ING Bank in Brussels, in a note.
One of the biggest fallers is embattled supermarket Morrisons, which leaves the top flight after 14 years at the end of this session, following a FTSE 100 Index reshuffle.
Hence, a policy divergence between the ECB and the Fed emerges, with the European Central bank keeping up with the status quo and its American counterpart moving towards a tighter monetary policy amid an improving job market. The yield on the 10-year French government bond rose 0.20 percentage points to 0.99 per cent, also a substantial move. The yield on the 10-year Treasury note jumped to 2.33 per cent, up sharply from 2.19 per cent the day before.
Janet Yellen continues to prime markets for December interest rate rise as comments during yesterday’s Joint Economic Committee hearing.
ENERGY: Benchmark U.S. crude was up 1.3 percent to $41.61 a barrel in electronic trading on the New York Mercantile Exchange.