Markets deeply unimpressed by Draghi promises
LONDON (AP) — Financial markets were unimpressed Thursday by the failure of the European Central Bank to announce immediate new measures to ease the continent's debt crisis.
Instead, its president, Mario Draghi, unveiled a list of hopes and aspirations. The bold commentary initially soothed investors but when he failed to provide details, the market mood turned negative.
"After all, these remain promises," said Dan Greenhaus, chief global strategist at BTIG. "Investors are tired of promises. They want action."
Markets have been volatile — before Draghi spoke, markets were buoyant, with stocks and the euro trading higher. But as the ECB's announcements fell short of expectations, the market mood turned sour and stocks took a battering, while the euro dropped around two cents against the dollar.
In Europe, Germany's DAX closed down 2.2 percent at 6,606.09 while the CAC-40 in France fell 2.7 percent to 3,232.46. The FTSE 100 index of leading British shares was down 0.9 percent at 5,662.30.
The euro was 0.8 percent lower at $1.2144, while the yield on Spain's 10-year yield spiked 0.38 percentage points to 7.06 percent, back above the 7 percent level that is considered unsustainable in the long run. The country's main stock market also took a big hit, trading 4.9 percent lower.
In the U.S., the Dow Jones industrial average was down 0.7 percent at 12,882 while the broader S&P 500 index fell 0.8 percent to 1,364.
Though Draghi told the press briefing, after the ECB held its main interest rate at 0.75 percent, that the bank can intervene in the bond market to drive down high interest rates, he delivered nothing concrete.
Instead, he insisted the euro currency was irreversible and promised to address investor concerns that the ECB will be repaid ahead of other investors on any bonds it holds.
Draghi also said the ECB would consider other emergency measures over the weeks to come. Though many analysts think that could mean the ECB could inject new money in the financial system, it's not a done deal — Germany's Bundesbank is likely to remain opposed.
"Draghi looked like a man defeated in the press conference, which came shortly after his meeting with the Jens Weidmann, head of the Bundesbank," said Craig Erlam, market analyst at Alpari. "Today's conference really has shown who is king."
Many analysts also said it's a big body blow for Draghi's credibility, and that's important given the importance of the ECB in trying to dam Europe's debt crisis.
Hopes that the ECB will back new measures were stoked a week ago when Draghi vowed to do what it takes to save the euro. Many expected the bank at the very least to resume its bond-buying program to keep a lid on Spain's and Italy's borrowing costs.
Earlier in Asia, Japan's Nikkei 225 stock average finished up 0.4 percent at 8,653.18 while Hong Kong's Hang Seng dropped 0.7 percent to 19,690.20. South Korea's Kospi shed 0.6 percent to 1,869.40 and China's Shanghai Composite fell 0.6 percent to 2,111.18.
Oil markets slid alongside equities— benchmark crude for September delivery was down 80 cents a barrel at $88.11 in electronic trading on the New York Mercantile Exchange.
