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European stocks diverge after rate calls

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(Globalpost/GlobalPost)

European stocks diverged and the euro fell sharply against the dollar Thursday after the ECB held its key rate despite calls by France and others for looser monetary policy.

Moments after ECB President Mario Draghi said that a strong rise in the euro in recent weeks was a sign of market confidence, the European single currency plunged to $1.3429 from $1.3519 late in New York on Wednesday.

"On the exchange rate, the ECB has no intention to intervene at this stage," said Marie Diron, senior economic adviser to the Ernst & Young Eurozone Forecast.

"It will wait to see some negative impact of the appreciation of the euro on growth and inflation before it feels it needs to act," she said.

In London, where the Bank of England also maintained its key rates, equities on the FTSE 100 index of top companies fell 0.48 percent to 6,265.07 points in afternoon trading.

In Germany, Frankfurt's DAX grew 0.67 percent to 7,634.68 points on yet another raft of rosy economic data, while in Paris the CAC 40 reversed 0.41 percent to 3,628.07 points.

Also Thursday, EU leaders began difficult talks on the bloc's 2014-20 budget under the watchful eye of a newly assertive European parliament hostile to any major spending cuts.

In November, EU leaders tried and failed to narrow sharp differences and while most expect a compromise to emerge this time, there is no certainty other than that the budget talks will be long.

Gold prices edged up to $1,675.64 an ounce from $1,674.25 on the London Bullion Market on Wednesday.

As widely predicted by analysts and ECB watchers, the central bank's policy-setting governing council voted to leave the main refinancing rate at a historic low of 0.75 percent, where it has been since July.

With ECB interest rates low and its latest anti-crisis bazooka -- the so-called OMT -- ready and primed for action, Draghi believes the bank has done what it needs to and it is now up to governments to resolve the long-running crisis, economists said.

"The Draghi speech was in the end quite accommodating," Alexandre Baradez of Saxo Bak in Paris.

"The ECB sees signs of recovery while remaining vigilant," he said.

France has triggered a debate this week that a strong euro could trample tender green shoots of recovery in the eurozone, even as Germany insists there is no cause for alarm just yet.

In London, The BoE also voted to freeze its key interest rate at a record-low 0.50 percent and maintain the level of its quantitative easing cash stimulus, despite the threat of a triple-dip recession in Britain.

The decision was in line with expectations and came as incoming BoE governor Mark Carney called for the bank to ready plans for a smooth eventual withdrawal of QE stimulus to avoid major disruption on markets.

In company activity, shares in Burberry tumbled 4.9 percent to 1,360 pence after the British luxury clothing and accessories group announced the departure of its chief financial officer Stacey Cartwright.

In Paris, Sanofi slumped 3.62 percent to 66.86 euros after the French drugmaker said the group's annual net profits slid 12.8 percent to 4.97 billion euros ($6.7 billion).

And Daimler rallied 3.09 percent to 44.34 euros after the German automaker said its profit after tax rose by 8.0 percent to 6.495 billion euros in 2012 on the back of record unit sales and revenues.

US stocks opened slightly lower Thursday as Wall Street took a breather from the aggressive buying that has characterised most of 2013 so far.

Five minutes into trade, the Dow Jones Industrial Average was down 0.11 percent, while the S&P 500 and the Nasdaq Composite Index were virtually unchanged.

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http://www.globalpost.com/dispatch/news/afp/130207/european-stocks-diverge-after-rate-calls