Europe close: Stocks in the red as ECB releases details of ABS
Euro-area stocks slid as the European Central Bank (ECB) decided to keep key rates unchanged and unveiled further details of its asset-purchase programmes.
The central bank decided to maintain the interest rate on the main refinancing operations, the interest rates on the marginal lending facility and the deposit facility at 0.05%, 0.30% and -0.20% respectively.
The ECB said its asset-backed securities (ABS) programme and buying of covered bonds will last at least two years in an effort to address low inflation and weak economic growth in the euro-area. Asset purchases will start in fourth quarter 2014, beginning with covered bonds in second-half of October.
Berenberg senior economist Christian Schulz believes the ECB remained somewhat cagey on the details surrounding the new measures.
"The ECB put flesh to the bones of the asset purchase programmes pre-announced at the September meeting. However, it did not deliver a single big number and did not go beyond the September announcements. That may come as a disappointment to some observers. In particular, the language on purchases of sovereign bonds did not change."
At a press conference following the decision ECB President Mario Draghi was questioned on the possibility of full-on quantitative easing to which he responded: "We did a lot of things since June. We lowered interest rates, went negative on the deposit facility, launched a third covered bond programme, launched TLTROs so let’s see."
The euro rose by as much as 0.6%, the most since May 8, to $1.2692.
Alasdair Cavalla, economist at Cebr said: “Cebr’s remains that full quantitative easing is necessary (although probably not sufficient) to raise the growth rate,” Cavalla said. “But we expect that the ECB will delay for some months before introducing such a policy.”
In the US, attention turned to the Labor Department’s report on initial jobless claims which came in at 287,000 in the week ended 27 September, following a revised 295,000 a week earlier. Economists had pencilled in 297,000 claims. The report comes a day ahead of the all-important monthly non-farm payrolls.
Xaar, Rocket
Print-head maker Xaar plunged after warning on profits for the current and next full year as a further slowdown in Chinese tile production activity has hit demand for its products.
Rocket Internet declined as the German firm completed the biggest initial public offering in the nation since 2007.
Hargreaves Lansdown rallied, driven higher by Numis which upgraded its rating on the stock to 'buy'.
Hochtief gained as the German builder said it will repurchase as much as 10% of its share capital.
Brent crude futures fell 1.9% to $92.37 per barrel, according to the ICE.