EUROPE MARKETS: European Stocks Fall, Euro Leaps As Markets 'aren't Buying' Dovish Draghi
July 20 2017 - 12:19PM
Dow Jones News
By Carla Mozee, MarketWatch
'Draghi and the ECB are trying to avoid a taper tantrum
scenario,' analyst says
European stocks reversed course and closed lower Thursday as
investors weighed the possibility the European Central Bank is
moving closer to reducing monetary stimulus for the eurozone
economy that has helped pushed equities to record highs.
German, French, Spanish and Italian shares flipped down at the
same time the euro leapt to its highest in more than a year against
the U.S. dollar. Those moves were made on the prospect that the ECB
will soon say it's time to start winding down its massive program
of bond purchases.
The Stoxx Europe 600 finished with a 0.4% loss at 384.07,
retreating from an intraday rise of 0.5%. Meanwhile, the euro
rallied to a high of $1.1657, the first time the euro could buy
more than $1.16 since May 2016, according to FactSet data.
European stocks can be hurt by a stronger euro, as strength in
the shared currency can make products sold by European exporters
more expensive for overseas customers to purchase.
The ECB on Thursday held interest rates steady, as expected.
Of greater interest to markets, ECB Chairman Mario Draghi at a
Thursday press conference said while there's been improvement in
the eurozone economy, a substantial degree of monetary
accommodation was still needed and that the bank will continue
buying government bonds at a pace of EUR60 billion a month until
December, as previously planned.
Live blog of Draghi's press conference recapped here
(http://blogs.marketwatch.com/thetell/2017/07/20/ecb-live-blog-mario-draghi-walks-the-policy-tightrope/)
The bank boss did say policy makers will discuss changes to
quantitative easing in the "autumn," but wouldn't say whether the
September meeting falls into that scope.
The euro soared as traders decided to brush past Draghi's
accommodative tone, said Oanda's senior market analyst Craig
Erlam.
"Draghi and the ECB are trying to avoid a 'taper tantrum'
scenario. They don't want to be seen to be tapering, and taper I
think is a dirty word at the ECB after what happened with the
[Federal Reserve] back in 2013. There was a clear determination [by
Draghi] to avoid similar language despite the fact that people are
pushing for them," to scale back the ECB's bond-buying program,
Erlam said.
The so-called taper tantrum was a run-up in yields after
then-Federal Reserve chief Ben Bernanke warned the central bank was
preparing to halt its quantitative easing purchases. Yields rise as
prices fall.
Read:Why Mario Draghi can't back down from ECB taper hints
(http://www.marketwatch.com/story/why-mario-draghi-cant-back-down-from-ecb-taper-hints-2017-07-19)
"Draghi's trying to send as dovish a message as possible while
leaving the door open to tapering at future meetings. Markets
aren't buying it anymore. They are looking for the meaning behind
the message," Erlam said.
The yield on Germany's 10-year bund fell less than 1 basis point
to 0.528%, but earlier rose to 0.559%, according to Tradeweb
data.
Individual indexes: European equities managed to pare deeper
losses by the end of trade as the euro came off session highs.
France's CAC 40 index closed down 0.3% at 5,199.22.
In Frankfurt, the DAX 30 index , which is heavily weighted by
exporters, ended down 4.8 points at 12,447.25.
Spain's IBEX 35 shed 0.2% to end at 10,564.80, and Italy's FTSE
MIB fell 0.2% to finish at 21,447.25.
But the U.K.'s FTSE 100 ended higher by 0.8% at 7,487.87
(http://www.marketwatch.com/story/ftse-100-lifted-as-unilever-advances-with-ecb-meeting-in-focus-2017-07-20),
aided by a weaker pound .
The Stoxx 600 on Wednesday closed up 0.8%,
(http://www.marketwatch.com/story/european-stocks-advance-helped-by-upbeat-earnings-2017-07-19)
aided by well-received earnings reports.
(http://blogs.marketwatch.com/thetell/2017/07/20/ecb-live-blog-mario-draghi-walks-the-policy-tightrope/)Earnings
season: A new wave of financial updates rolled in on Thursday, with
Publicis Groupe SA (PUB.FR) shares rallying 4.6%. The French
advertising heavyweight confounded expectations by posting a rise
in second-quarter profit
(http://www.marketwatch.com/story/publicis-profit-up-as-us-revenue-turns-positive-2017-07-20)
as U.S. revenue turned positive.
Unilever shares (ULVR.LN) picked up 1.7% after the maker of Ben
& Jerry's ice cream and other consumer goods reported a sharp
rise in first-half profit
(http://www.marketwatch.com/story/unilever-posts-profit-gain-lifts-margin-guidance-2017-07-20),
making good on its vow to improve performance after rebuffing a
Kraft Heinz Co. (KHC) bid.
But on the downside, shares of Nordea Bank AB (NDA.SK) dropped
5.2% after the Swedish bank's second-quarter profit of 743 million
euros ($855.7 million) missed expectations
(http://www.marketwatch.com/story/nordea-profit-falls-domicile-decision-in-sept-2017-07-20).
(END) Dow Jones Newswires
July 20, 2017 12:04 ET (16:04 GMT)
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