Europe stocks reverse post-ECB gains after President Draghi’s rate remarks

The European Central Bank cut interest rates to boost the euro zone economy, on March 10, 2016.
The European Central Bank cut interest rates to boost the euro zone economy, on March 10, 2016.PHOTO: REUTERS

FRANKFURT (REUTERS, BLOOMBERG) - European stocks, which surged after the European Central Bank (ECB) unveiled its stimulus package, reversed gains after President Mario Draghi said he does not anticipate further rate cuts. 

ECB delved deep into its remaining arsenal of stimulus options on Thursday (March 10), cutting all three of its interest rates and expanding asset-buying to boost the economy and prevent ultra-low inflation becoming entrenched.

The Stoxx Europe 600 Index lost 0.4 per cent at 3.38 pm in London. The benchmark earlier jumped as much as 2.5 per cent after the ECB lowered its three main interest rates, increased bond purchases by a third and made corporate debt eligible.

Shares then moved lower, erasing gains as the euro strengthened, after Draghi’s comments stoked concern about limited monetary- policy tools in the future. 

Draghi has “brought the bazooka out this time, but after the initial reaction, the perception that central banks are beginning to panic and are running out of options crept back in,” said Patrick Spencer, equities vice chairman at Robert W. Baird & Co. in London.

“Maybe there’s less scope on the interest rates side, but there are more tools that can be used and they will provide support for stock prices.”

Speculation of central-bank action and a rally in miners had boosted the Stoxx 600 up 12 per cent from a 2013 low reached last month through yesterday’s close.

Most industry groups fell today, reversing earlier advances, with banks and utilities among notable exceptions.  Commodity producers, the best performers in the recent rebound, fell 2.1 per cent as a group today.

They reversed earlier gains as Anglo American Plc and Glencore Plc lost 2.2 per cent or more. 

Lenders, the worst performers this year, gained 2.5 per cent as a group today. Those in Italy and Spain outperformed, pushing the country’s benchmarks to the best performance among western- European benchmarks.

UniCredit SpA, Banco Popular Espanol SA and Alpha Bank AE jumped 5.7 per cent or more.  The exporter-heavy DAX Index of Germany slid 0.3 per cent, erasing an advance of as much as 2.8 per cent as the euro rose against the dollar.