BU: Euro falls on European Central Bank outlook; U.S. stocks pare gains
“But with core inflation losing some upward momentum in recent months and “some” FOMC participants raising concerns about the inflation outlook, Nomura believes that the Committee will want more evidence that inflation is moving in the right direction before raising interest rates, supporting our call for lift-off in December”.
KEEPING SCORE: The Dow Jones industrial average was up 138 points, or 1 percent, to 16,490 as of 12:10 p.m. Eastern time. The Standard & Poor’s 500 index rose 2.27 points, or 0.1 percent, to 1,951.13 and the Nasdaq composite fell 16.48 points, or 0.4 percent, to 4,733.50. Major indexes dipped briefly into the red by mid-afternoon before ending mostly higher.
The Governing Council “emphasises its willingness and ability to act, if warranted, by using all the instruments available within its mandate and, in particular, recalls that the asset purchase program provides sufficient flexibility in terms of adjusting the size, composition and duration of the program”, Draghi said.
“On his birthday, Mario Draghi did not receive, but actually gave a present to financial markets, stressing the ECB’s determination to do everything to support the eurozone economy”, Brzeski concluded.
Data released on Thursday showed new applications for unemployment benefits rose more than expected last week, but the underlying trend remained consistent with a strengthening labor market. Germany’s DAX closed up 2.7 percent, France’s CAC-40 rose 2.2 percent and U.K.’s FTSE 100 rose 1.8 percent.
Energy stocks rose more than the rest of the market. While chances of a September interest rate hike have diminished because of signs of weakening global growth and a sell-off in Chinese stocks, the growing US economy may be ready to withstand higher interest rates.
Heightened emphasis will be placed on the August jobs report after the Fed said in the minutes of its July policy meeting that it “anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen some further improvement in the United States labour market and is reasonably confident that inflation will move back to its 2% objective over the medium term”. Economists are forecasting that employers created 220,000 jobs last month and that the unemployment rate fell to 5.2 percent.
Retailer Next was also under pressure after Exane BNP Paribas cut its stance on the stock to “underperform” from “neutral”, while oil giant BP slid after Bank of America Merrill Lynch downgraded it on M&A and dividend risks.
United States benchmark West Texas Intermediate for October delivery was up 50 cents to US$46.75 a barrel on the New York Mercantile Exchange. Brent crude oil, which is used to price oil internationally, gained 85 cents to $51.35 a barrel in London.
