ECB stimulus signal leaves European markets hanging
November 26 2014 11:32 PM
A branded Thomas Cook barrier is seen in front of the company’s empty check-in desk at Glasgow Airpo
A branded Thomas Cook barrier is seen in front of the company’s empty check-in desk at Glasgow Airport, Scotland. Thomas Cook shares fell 17.69% to 1


Europe’s main stock markets were flat yesterday after the European Central Bank signalled it could begin purchasing government bonds – but not until next year.

The Frankfurt-based ECB will be able to gauge early next year whether it needs to start buying sovereign bonds to stimulate the eurozone economy, its deputy president Vitor Constancio said.

“During the first quarter of next year we will be able to gauge better... (whether) we will have to consider buying other assets, including sovereign bonds in the secondary market,” Constancio said in London.

ECB chief Mario Draghi had last week signalled readiness to act quickly to deter deflation, sparking stimulus hopes.

London’s benchmark FTSE 100 index shed 0.03% to 6,729.17 points, also unmoved by official data confirming the British economy grew by 0.7% in the third quarter.

Elsewhere, Frankfurt’s DAX 30 added 0.55% to 9,915.56 points while the Paris CAC 40 shed 0.20% to 4,373.42 compared with Tuesday’s closing value.

US stocks were little changed in early trade yesterday as investors digested a stream of mixed economic data in the last day of business before the Thanksgiving holiday.

About 25 minutes into trade, the Dow Jones Industrial Average stood at 17,810.48, down a scant 4.46 points (0.03%).

The broad-based S&P 500 edged up 1.26 (0.06%) to 2,067.29, while the tech-rich Nasdaq Composite Index added 7.63 (0.16%) at 4,765.88.

European shares “flat-lined after (Constancio) suggested full sovereign quantitative easing would not come until next year, if at all,” said Jasper Lawler of CMC Markets.

“Constancio’s comments are the strongest indication yet that policymakers wish to wait for the results of existing stimulus measures before implementing more,” he added.

“The optimists hope Mario Draghi will unveil the ‘stimulus to end all stimuli’,” said analyst Chris Beauchamp of the IG consultancy.

Also yesterday, European Commission chief Jean-Claude Juncker unveiled a huge €315bn investment plan to “kickstart” the stalling economy, saying it would show the world that Europe is back in business.

The eagerly awaited plan involves the EU setting up a €21bn ($26bn) fund with the aim of drawing in 15 times that amount in private investment.

Juncker hopes the proposal will boost desperately needed jobs and growth amid concerns that Europe’s failure to recover from the financial crisis is dragging the world economy down with it.

Markets were also hesitant ahead of today’s key Opec meeting in Vienna and the long Thanksgiving holiday in the US, traders said.

In foreign exchange deals yesterday, the euro rose to $1.2508 in London compared with $1.2474 late in New York on Tuesday.

The euro slipped against the yen, to 147.08 yen from 147.18. The dollar also weakened against the Japanese currency, to 117.59 from 117.97 yen.

On the London Bullion Market, gold slid to $1,195.70 an ounce, compared with $1,199 late on Tuesday.

In company news yesterday, Thomas Cook’s share price tumbled by more than a fifth after the British travel group announced the exit of chief executive Harriet Green.

She left with immediate effect, saying her work at the once-troubled company was done, and was replaced by chief operating officer Peter Fankhauser.

Shares were also hit as Thomas Cook warned in a separate earnings statement that it expects growth this year to be at a more moderate pace because of the tougher trading environment.

Its shares fell 17.69% to 113.5 pence, dragging down London’s second-tier FTSE 250 index, which was off 0.27% at 15,788.43 points.





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