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Draghi fails to impress markets

Friday, August 03, 2012

LONDON, England - FINANCIAL markets were unimpressed yesterday by the failure of the European Central Bank to announce immediate new measures to ease the continent’s debt crisis.

Instead, its president, Mario Draghi, unveiled a list of hopes and aspirations. The bold commentary initially soothed investors but when he failed to provide details, the market mood turned negative.

“After all, these remain promises,” said Dan Greenhaus, chief global strategist at BTIG. “Investors are tired of promises. They want action.”

Markets have been volatile — before Draghi spoke, markets were buoyant, with stocks and the euro trading higher. But as the ECB’s announcements fell short of expectations, the market mood turned sour and stocks took a battering, while the euro dropped around two cents against the dollar.

In Europe, Germany’s DAX closed down 2.2 per cent at 6,606.09 while the CAC-40 in France fell 2.7 per cent to 3,232.46. The FTSE 100 index of leading British shares was down 0.9 per cent at 5,662.30.

The euro was 0.8 per cent lower at US$1.2144, while the yield on Spain’s 10-year yield spiked 0.38 percentage points to 7.06 per cent, back above the 7 per cent level that is considered unsustainable in the long run. The country’s main stock market also took a big hit, trading 4.9 per cent lower.

In the US, the Dow Jones industrial average was down 0.7 per cent at 12,882 while the broader S&P 500 index fell 0.8 per cent to 1,364.

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