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Category: Stockmarket / Money and Monetary Policy / Currency / Futures / Markets

US stocks gain ground, despite ECB asset purchase cutback

Friday, 9 Dec 2016 05:49:11 | Rebecca Hyam

ECB president Mario Draghi said the bank will lower its asset purchase program next year. (Reuters: /Yuri Gripas)

Markets in the United States and Europe gained ground overnight, despite a surprise move by the European Central Bank to trim its asset purchasing program.

Markets at 8:15am (AEDT):

  • ASX SPI 200 futures +0.4pc 5,564
  • AUD: 74.57 US cents, 59.22 British pence, 85.03 Japanese yen, 70.23 euro cents, $NZ1.0394
  • US: S&P 500 +0.19pc to 2,245, Dow Jones +0.37pc to 19,621, Nasdaq +0.3pc to 5,409
  • Europe: Euro Stoxx +1.27pc to 340.38, FTSE +0.42pc to 6,931, DAX +1.75pc to 11,179
  • Commodities: Gold -0.28pc to $US1,170.22/ounce, Brent crude oil +1.66pc to $US53.88/barrel, iron ore $US82/tonne

The ECB left interest rates unchanged, as was widely forecast, but it also decided to reduce its asset buying plans to 60 billion euros per month, from the current 80 billion level, starting from April next year.

The economic stimulus program was also extended to the end of 2017, which was three months longer than expected.

The 20 billion euro per month reduction caught financial markets off guard, but the president of the ECB Mario Draghi stressed that he was not offering an outright winding-down of the program.

"There is no question about tapering, and we can even go back to 80 (billion euros) if necessary ... there are a range of options," he said.

"The key message is to show that there is no tapering in sight, to show that the ECB is going to stay in the market, to show that we will continue to exert pressure on market prices."

NAB senior market strategist Gavin Friend wrote in an economic note that the decision was something that virtually no one saw coming.

"Very few market observers were looking for a reduction in the monthly amount of purchases, with most economists expecting the ECB to announce today that come next March it will continue to buy bonds at an unchanged 80 billion euros per month pace for a further three, six or even nine months," he wrote.

"The nine month period announced today looked initially to be an attempt to soften the news and indeed acted to dampen the initial shock, which came 45 minutes before ECB president Draghi's press conference."

On Wall Street, industrial and financial stocks continued their almost month-long solid run, thanks to Donald Trump's pledge to spend more on infrastructure and simplify regulations in the banking industry.

Overnight, there was also some encouraging news on the labour market, with a fall in the number of Americans filing for unemployment benefits.

Applications for the dole fell by 10,000 last week to a seasonally-adjusted 258,000.

It marked the 92nd straight week that claims were below 300,000 - a threshold associated with a healthy labour market.

The US is close to full employment, with the Federal Government reporting last week that the unemployment rate fell to a nine-year-low of 4.6 per cent in November.

The local market is on track for a positive start, with the ASX SPI 200 up 0.4 per cent to 5,564 at 8:15am (AEDT).

At the same time, the Australian dollar had fallen to 74.57 US cents.

West Texas crude oil was higher at $US50.79 a barrel, the price of a barrel of Tapis was lower at $US53.69 and spot gold had eased to $US1,170.22 an ounce.

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