Europe close: Non-standard measures weren´t even discussed, ECB says

Date: Thursday 05 Jul 2012

-ECB cuts rates by 25 bp
-China cuts rates by 31bp
-Bank of England increases QE by 50bn pounds
-Finland to ask for collateral from Spain
-Mixed or slightly better than expected economic data in US
-ECB (Draghi): No one even thinking of non-standard measures

FTSE-100: 0.14%
Dax-30: -0.45%
Cac-40: -1.12%
Stoxx 600: -0.16%
FTSE-Mibtel: -2.03%
Ibex 35: -0.57%

European equities finished the day in a mixed fashion on a rather volatile day of trading, with periphery benchmarks under water (following a brief foray into the blue) but British and German indices faring better.

The above despite the announcement of an interest rate cut (as expected) by the European Central Bank (ECB) and a further dose of quantitative easing out of the Bank of England.

Worth noting perhaps, some observers had been musing before the ECB´s announcement that a decrease in its deposit rate would constitute a sign of serious worry by the central bank over the current situation in the Eurozone.

As well, and despite the above, in his post-meeting press conference ECB President Mario Draghi has struck a rather downbeat note. On the one hand, he seems to have questioned how effective today´s rate cut will actually be. That while adding that the possibility of further non-standard measures was neither discussed today nor is it even on anyone´s mind.

Acting as a backdrop, the People´s Bank of China has announced a surprise reduction in its one year lending rate, by 31 basis points, to 6%, but to little avail.

Volkswagen has reached an agreement with German tax authorities to carry out the purchase of the remainder of Porsche which it does not already own, for €4.46bn.

French Prime Minister Jean-Marc Ayrault said on Wednesday that gas prices in France will not rise more than the rate of inflation and that the government is preparing a plan to make gas and electricity more affordable for consumers, Reuters reports.

From a sector stand-point, and within the DJ Stoxx 600, the worst performance was seen in shares of: banks (1.21%), construction (1.18%) and chemicals (1.02%).

Better than expected economic data

German factory orders increased by 0.6% month-on-month in May (Consensus: 0.0%).

Economic data Stateside today has come in mixed or slightly better than expected, although investors are keen to see tomorrow´s monthly employment report. Ironically, some had been banking on weak data to strengthen the case for further quantitative easing from the Federal Reserve.

Oil and euro diverge

The euro/dollar finished lower by 1.11% to the 1.2390 dollar mark.

Front month crude futures are up by 1,286 dollars per barrel on the ICE, to the 101.07 dollar level.

AB

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