European markets fall on stimulus jitters

December 06, 2013 - 6:28:41 am

A man walks past the Bombay Stock Exchange (BSE) building in Mumbai yesterday. The rupee rose to a five-week high against the dollar and stocks jumped more than 2 percent to near record highs as exit polls predicted a strong showing for the key opposition party in recent state elections.
LONDON: European stock markets fell and the euro strengthened yesterday, as jitters over the fate of monetary stimulus from the US Federal Reserve overshadowed an improved growth forecast for the eurozone by the ECB.

Traders largely shrugged off decisions by the European Central Bank and the Bank of England to hold key rates, fixing their focus instead on the fate of US stimulus that has boosted markets to record highs.

At close, London’s benchmark FTSE 100 index was down 0.18 percent at 6,498.33 points. Frankfurt’s DAX 30 fell 0.61 percent to 9,084.95 points and the CAC 40 in Paris shed 1.17 percent to 4,099.91 points.

In foreign exchange activity, the euro climbed to $1.3674 -- the highest level since late October. It later stood at $1.3670, up from $1.3591 on Wednesday. Gold prices, meanwhile, fell to $1,222.50 an ounce on the London Bullion Market, from $1,227.50.

“Three weeks before Christmas, the ECB took a pause in action. As expected, they kept interest rates at record lows this month after cutting the main rate to 0.25 percent in November,” Christian Schulz of Berenberg Bank said.

“With inflation a little bit higher, unemployment tentatively stabilising and leading indicators pointing to a slightly firming recovery, the ECB did not see a need for immediate further action, making the statement sound slightly less dovish than in November,” he said.

US data also weighed, with the Commerce Department announcing speedy 3.6 percent growth in the third quarter, much higher than the original estimate of 2.8 percent.  Also, first-time claims for US unemployment benefits fell sharply in the last week of November to 298,000, far below the average of recent months.

This sent US stocks lower as the market continues to grapple with the significance of better data, which could prompt the Federal Reserve to scale back its bond-buying stimulus.

“At the moment, market participants are trying to factor what the Fed’s next move will be and when,” said analyst Patrick O’Hare. “There is confusion in that respect, which is why trading conditions could remain choppy.”

In afternoon trade, the Dow Jones Industrial Average dipped 0.34 percent to 15,836.21 points. The broad-based S&P 500 dropped 0.19 percent to 1,786.16 points, while the tech-rich Nasdaq Composite Index edged down 0.23 percent to 4,028.87 points. 

In Britain, the Bank of England also voted yesterday to freeze interest rates at a record-low and maintain its stimulus level. The British government meanwhile hiked its economic growth forecasts as the recovery gathers speed but vowed to pursue its deficit-slashing strategy. 

Asian markets mostly fell with Tokyo down a sharp 1.50 percent. Hong Kong was flat.

Sensex rises 

A benchmark index of the Indian equities markets yesterday jumped 249 points or 1.20 percent, its highest closing in a month on back of healthy buying support for bank, capital goods and oil and gas stocks.

Markets reacted positively to exit poll results which predicted a strong performance of the key opposition Bharatiya Janata Party in four out of five states where elections were held recently.

The 30-scrip S&P Sensex of the Bombay Stock Exchange (BSE), which opened sharply higher at 20,992.25 points, closed at 20,957.81 points, up 249.10 points or 1.20 percent from its previous day’s close at 20,708.71 points. 

The Sensex breached the psychological resistance level of 21,000 points and touched a high of 21,165.60 intra-day, gaining 456 points. It touched an intra-day low of 20,929.20 points.

The wider 50-scrip S&P CNX Nifty of the National Stock Exchange (NSE) closed 80.15 points or 1.30 percent higher at 6,241.10 points. There was strong buying support in banking, capital goods, oil and gas, metal and public sector undertakings stocks. However, healthcare, fast moving consumer goods and information technology stocks declined.

The S&P BSE bank index soared 565.50 points, followed by capital goods index which gained 353.09 points, oil and gas index was up 107.09 points, metal index which closed trade 105.66 points up and PSU index which edged higher by 87.34 points.

However, healthcare index declined by 141.01 points, FMCG index was down 60.39 points and IT index closed 42.80 points lower. 

Major Sensex gainers were: ICICI Bank, up 6.66 percent at Rs1,136.10; HDFC Bank, up 4.52 percent at Rs687.75; Larsen and Toubro,  up 4.49 percent at Rs1,086.65; BHEL, up 3.93 percent at Rs170.55; and Maruti Suzuki, up 3.67 percent at Rs1,701.45.

The main losers were: Sun Pharma, down 2.24 percent at Rs578.25; DrReddysLab, down 1.52 percent at Rs2,413.15; ITC, down 1.39 percent at Rs308.90; NTPC, down 0.96 percent at Rs144.05; and Hindustan Unilever, down 0.90 percent at Rs.566.40.

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