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Markets shrug off lack of ECB stimulus signal

Markets shrug off lack of ECB stimulus signal

LONDON: European markets took in their a lack of a hoped-for signal from the ECB about a quick shot of stimulus to handle Brexit but airline shares hit turbulence Thursday following a bleak outlook from EasyJet.

As expected, the European Central Bank did not announce any new measures at its regular policy meeting on Thursday.

However, investors had been looking for ECB chief Mario Draghi to hint strongly at a further loosening in monetary policy in September to deal with any slowdown caused by uncertainty after Britain’s shock vote on June 23 to quit the European Union.

Draghi signalled the “readiness, willingness, ability” of ECB policymakers to use all the central bank’s tools if needed, but also praised the resilience of the markets following the Brexit vote.

Joshua Mahony at financial derivatives trading house IG said the “key takeaway is that Draghi needs more data” before stepping up stimulus.

“Sufficient data may not be available by the next meeting, pointing towards longer delay,” he tweeted.

ING DiBa economist Carsten Brzeski said Draghi “kept all of his cards to his chest”.

Expectations of further stimulus have helped European stocks to recover much of their losses following the surprise British vote to leave the EU, but markets took the lack of a clear signal from Draghi in stride.

“Stocks proved fairly resilient while the euro only rose modestly during the ECB press conference before falling back,” said CMC Markets analyst Jasper Lawler.

Frankfurt’s DAX 30 stock index ended the day with a gain of 0.1 percent while in Paris the CAC 40 edged down 0.08 percent.

Outside the eurozone, London’s benchmark FTSE 100 stock index slid 0.4 percent.

Sentiment was hit also by official data showing British retail sales sank in June by the heaviest amount in six months though on poor weather rather than uncertainty in the run-up to the Brexit vote.

On the corporate front, shares in EasyJet fell 5.3 percent to 1,067 pence, as the boss of the British no-frills airline warned that carriers are facing one of their most challenging periods “for a long time”, with peak summer bookings hit by terror attacks and Brexit uncertainty.

EasyJet chief executive Carolyn McCall’s comments to reporters came after the airline published a third-quarter trading update that failed to provide a full-year profits forecast.

The airline’s update weighed also on rivals, with shares in British Airways owner IAG shed 3.6 percent to 405.6 pence and German carrier Lufthansa slumped 6 percent to 10.44 euros.

The absence of annual profits guidance “is not reassuring and highlights the wide range of potential outcomes, even at this late stage of the year”, said Gerald Khoo, analyst at broker Liberum.

Asian stock markets mostly rose Thursday following a fresh record on Wall Street on Wednesday.

After a slight stumble Tuesday and Wednesday caused by profit-taking, the equities rally resumed with Tokyo again leading the pack following a report that Japan is planning a new, giant stimulus programme.

Prime Minister Shinzo Abe is eyeing a package of at least 20 trillion yen about double the size initially expected to kickstart the economy from years of slumber and light a fire under torpid inflation, Kyodo News agency said.

US stocks were broadly flat in late morning trading on Thursday following a streak of record-setting sessions, with the the Dow Jones Industrial Average slipping 0.1 percent.

Key figures around 1530 GMT


London – FTSE 100: DOWN 0.4 percent at 6.699.89 points (close)

Frankfurt – DAX 30: UP 0.1 percent at 10,156.21 (close)

Paris – CAC 40: DOWN 0.08 percent at 4,376.25 (close)

EURO STOXX 50: UP 0.2 percent at 2,973.19

New York – DOW: DOWN 0.1 percent at 18,568.32

New York – S&P 500: FLAT at 2,173.12

New York – Nasdaq: DOWN 0.1 percent at 5,084.54

Tokyo – Nikkei 225: UP 0.8 percent at 16,810.22 (close)

Hong Kong – Hang Seng: UP 0.54 percent at 22,000.49 (close)

Shanghai – Composite: UP 0.4 percent at 3,039.01 (close)

Euro/dollar: DOWN at $1.10 from $1.1016

Pound/dollar: DOWN at $1.31 from $1.3197

Dollar/yen: DOWN at yen from 106.87 yen

Copyright AFP (Agence France-Presse), 2016

Courtesy : BRecorder



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