GLOBAL MARKETS-Stocks up on ECB cut, but euro slumps after Draghi

Thu May 2, 2013 10:34am EDT

* ECB cuts rates 25 bps as to all-time low
    * Euro tumbles as ECB suggests open to negative deposit
rates
    * Oil rises above $100 after ECB rate cut
    * Bond prices weaken on news U.S. jobless claims fall


    By Herbert Lash
    LONDON/NEW YORK May 2 (Reuters) - The euro slumped against
the dollar on the prospect of negative deposit rates after the
European Central Bank cut interest rates to an all-time low on
Thursday, a move that along with U.S. economic data lifted Wall
Street stocks.
    The ECB lowered its main rate by a quarter percentage point
to 0.50 percent, its first cut in 10 months, and pledged as much
liquidity as euro zone banks need well into next year.
 
    The cut was widely expected after ECB President Mario Draghi
said last month that the bank stood ready to act. But the euro
fell after Draghi said the central bank is technically ready for
 negative deposit rates. 
    The euro slid as low as $1.3062, according to Reuters
data, and was last at $1.3085, down 0.7 percent on the day.
    If negative deposit rates were adopted, euro zone banks
would have to pay to deposit money at the central bank, giving
them an incentive to lend money rather than hoard it.
    Equities rose on the view the world's biggest central banks,
including the Federal Reserve and the Bank of Japan, are trying
to encourage economic growth through bond-buying programs that
have pushed interest rates to historic lows.
    "You've got the Fed still in stimulus mode and Japan
surprising markets with the size of their latest stimulus
package. Now you have the ECB cutting rates," said Todd
Salamone, director of research at Schaeffer's Investment
Research in Cincinnati.
    "It all adds to the theme that global central banks are in a
stimulus mode and that is positive for equities," Salamone said.
    The Dow Jones industrial average was up 50.89 points,
or 0.35 percent, at 14,751.84. The Standard & Poor's 500 Index
 was up 6.17 points, or 0.39 percent, at 1,588.87. The
Nasdaq Composite Index was up 17.87 points, or 0.54
percent, at 3,316.99.
    Stocks also rose on news the number of Americans filing new
claims for jobless benefits fell sharply last week to its lowest
level since the early days of the 2007-09 recession, suggesting
the job market is still healing despite a still weak economy.
 
    Other data showed a narrowing of the U.S. trade deficit in
March, although drops in imports and exports provided a warning
about the strength of domestic and foreign demand. 
    Leading European shares, as measured by the FTSEurofirst 300
index, clawed back into positive territory after having
spent most of the morning in the red. The index was up 0.1 
percent at 1202.72.
    MSCI's all-country world index also pared
losses and was flat.
    U.S. Treasuries prices weakened further on news of the U.S.
jobless claims, with the benchmark 10-year note falling 3/32 in
price to yield 1.6408 percent.
    Oil rose above $100 a barrel as some investors saw this
week's price slide as overdone, although ample supply and
concerns about the outlook for demand due to shaky economic
growth limited the rally.
    Brent crude rose 62 cents to $100.57 a barrel after
trading as low as $99.51. U.S crude was 68 cents higher
at $91.71 a barrel.
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.