Euro drops on ECB comments, stocks remain steady

Euro drops after ECB says it will monitor its value but stock markets make small gains

Associated Press
Euro drops on ECB comments, stocks remain steady
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An investor looks at the stock price monitor at a private securities company Wednesday, Feb. 6, 2013, in Shanghai, China. Asian shares rose Wednesday as Japan's benchmark surged to its highest level since Sept. 2008 though wariness over corporate earnings pulled European indexes lower in early trading. (AP Photo)

LONDON (AP) -- Stock markets were largely stable on Thursday while the euro fell sharply after the European Central Bank said it would monitor its value and economic impact.

After the ECB kept interest rates on hold, as expected, President Mario Draghi told reporters at a press conference that the bank would "want to see if the (euro's) appreciation will alter our assessment as far as price stability is concerned."

Although he indicated no concrete action, the comment fueled market speculation that the strong euro, which could cause an excessive drop in inflation, might make the ECB more likely to cut interest rates in coming months. Lower rates tend to weaken a currency.

The 17-country euro lost all its previous gains to trade down 0.7 percent to $1.3424.

Stock markets held their poise, with Germany's DAX up 0.8 percent to 7,638.27 and France's CAC 40 0.1 percent higher at 3,646.53. Britain's FTSE 100 was down 0.4 percent to 6,271.18.

Corporate news was mostly positive, with shares rising in Credit Suisse, Daimler and Statoil after they announced profit increases. The stock of Alcatel-Lucent rose almost 8 percent on news that the CEO will leave, raising hopes for a change in direction for the troubled telecoms company.

Wall Street, however, edged lower on the open — the Dow fell 0.4 percent to 13,929 while the broader S&P 500 shed 0.2 percent to 1,508.84.

Earlier in Asia stocks ended the day mostly lower.

Japan's Nikkei 225 led the way with a 0.9 percent drop to close at 11,357.07 as investors cashed in their gains after the benchmark rose to its highest since September 2008 in the previous session.

South Korea's Kospi dipped 0.2 percent to 1,931.77 while Hong Kong's Hang Seng dropped 0.3 percent to 23,177. Benchmarks in India, New Zealand, Singapore and Thailand also fell but Australia's S&P/ASX 200 gained 0.3 percent to 4,935.70.

Asia's other big loser was the benchmark Shanghai Composite Index in mainland China, which ended 0.6 percent lower at 2,418.53. China's smaller Shenzhen Composite Index rose 0.5 percent to 956.73.

Chinese investors were most likely closing out their positions ahead of the Lunar New Year holiday next week. Holidays in China can be an especially uncertain time for investors because authorities in Beijing often use the occasion to announce new policy measures.

Several analysts have forecast that Japan's currency-driven market rally might soon be over as investors bet there's little room for the country's currency to weaken further. Japan's Prime Minister Shinzo Abe has insisted that the country's central bank act more aggressively to ease monetary policy to help spur economic growth, but investors are worried that this will have a knock-on effect to every other currency in the world.

A weaker yen benefits Japan's export manufacturers because it makes their products cheaper in overseas markets. Sony Corp. rose 2.6 percent in Tokyo after it reported a smaller fourth quarter loss as sales inched up thanks mostly to the weaker yen.

The dollar was up 0.2 percent against the Japanese yen, at 93.59 yen.

In energy markets, benchmark crude for March delivery rose 45 cents to $97.07 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell 2 cents to end at $96.62 on Wednesday.

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Kelvin Chan in Hong Kong contributed to this report.

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