European stock markets fall; BoE, ECB keep rates

November 09, 2012 - 4:45:22 am

LONDON: European stock markets closed lower and the euro edged down yesterdya after European central banks held key interest rates at record low levels and debt-stricken Greece approved new austerity measures.

Financial markets are still concerned about how the Greek debt drama will unfold and that President Barack Obama’s re-election has raised the spectre of a bitter fiscal stand-off in Washington.

After spending most of the day in the black, London’s FTSE 100 index of top companies reversed course to close down by 0.27 percent at 5,776.05 points, Frankfurt’s DAX 30 gave up 0.39 percent to 7,204.96 and the Paris CAC 40 eased 0.06 percent lower to 3,407.68 points.

In widely expected moves, the Bank of England and European Central Bank held their main lending rates at 0.50 percent and 0.75 percent respectively.

“Both the Bank of England and the European Central Bank kept their monetary policies unchanged at their respective meetings today, raising some slight concerns that the stimulus spigot is getting tighter,” said Christopher Vecchio, Currency Analyst at DailyFX.

After the rate decisions, “attention is now on Monday’s EU meeting where ministers will cast their verdict on the Greek deal,” said Ishaq Siddiqi at ETX Capital

Eurozone finance ministers are to decide whether to release a long-awaited installment of financial aid to Greece, which posted yesterday a record level of unemployment at 25.4 percent of the workforce.

In Frankfurt, ECB President Mario Draghi welcomed a sweeping austerity package passed by Greek lawmakers on Wednesday to unlock its critical international aid.

Budget cuts totalling ¤18.5bn ($23.6bn) won a narrow majority as thousands of anti-austerity protestors demonstrated around parliament in Athens. The measures to be implemented by 2016 include raising the retirement age to 67, slashing benefits and cutting the minimum wage.

Washington was in focus after Obama’s solid win on Tuesday despite a dragging economy and the stifling unemployment that haunted his first term. In New York, US stocks also opened on an upbeat note but then fell into the red. In midday trades, the Dow Jones Industrial Average gave up 0.18 percent while the broad-based S&P 500 was off by 0.27 percent and the tech-rich Nasdaq Composite slipped by 0.31 percent.

In foreign exchange activity, the euro fell to $1.2717 from $1.2767 late in New York on Wednesday. 

On sovereign bond markets, the rate on 10-year Spanish debt jumped to 5.851 percent from 5.693 percent, while the comparable Italian rate rose to 5.019 percent from 4.908 percent. 

Gold prices edged up to $1,717 an ounce from $1,715.25 on Wednesday.

On the corporate front, shares in Siemens jumped 1.80 percent to ¤80.27, while Commerzbank plummeted by 5.77 percent to ¤1.42 after the second biggest German bank’s return to profit in the third quarter fell short of expectations.

Britain’s second-biggest insurer Aviva climbed 0.55 percent to 330.30 pence as the company announced a drop in sales and confirmed it was in talks to sell its US business.