, as Volatility Dominates Markets after ECB Rate Cut, Greece Confidence Vote, and Mixed U.S. Data
Markets fluctuated heavily on Thursday amid the mixed reports that were released, where the start was with the surprise rate cut delivered by the European Central Bank, where the ECB cut the benchmark interest rates by 25 basis points to 1.25%, while markets were expecting the ECB to hold rates steady. Meanwhile, data from the United States provided mixed results, as jobless claims fell below 400,000, while the ISM services index showed slowing activities.
The ECB new Chairman Mario Draghi signaled that economic growth is likely to weaken in the second half of this year and throughout 2012, where Draghi didn’t exclude the possibility of a mild recession in the euro zone area. Draghi also signaled that inflation rates are expected to drop throughout 2012, as slower economic growth is likely to weigh down on price pressures.
The jobless claims fell last week to 397,000 below expectations of 400,000, which provided hope that economic conditions could be improving in the United States. Nonetheless, the ISM services index slowed in October to 52.9 from 53.0 and below expectations of 53.5, which raised concerns among traders, as instability remains the dominant theme for theUnited Stateseconomy.
Meanwhile, Greece continued to dominate the global scene on Thursday, where earlier reports signaled Greek Prime Minister George Papandreou could resign amid strong opposition to his intentions of holdings a referendum on the new bailout deal. However, Papandreou was quick to deny the reports of his resignation, while other reports suggested Papandreou could drop his plan of holding a referendum ahead of a confidence vote for his government on Friday.
The mixed data from the U.S., the ECB rate cut, and the news fromGreece, sent markets to chaos, as strong volatility dominated trading in equity, commodity, and foreign exchange markets, where the U.S. dollar fell on daily basis in volatile trading.
The U.S. dollar extended its losses against a basket of major currencies on Thursday, where the U.S. dollar index was trading at 77.03, compared with the opening level at 77.29. The Euro inclined against the Dollar in volatile trading, where the EUR/USD pair traded at $1.3756, compared with the opening level at $1.3688, the British Pound also gained against the Dollar, where the GBP/USD pair traded around $1.5993, compared with the opening level at $1.5906, and the U.S. dollar weakened against the Japanese Yen, where the USD/JPY pair was trading around 77.99, compared with the opening level at 78.14.
Stocks in the United States gained by opening on Thursday after fluctuating heavily at the start of the session, as the Dow Jones Industrial Average was higher by nearly 0.70% to trade around 11,920, while the S&P 500 index was up by nearly 0.50% to trade around 1244. European stock indexes were also higher before closing on Thursday, where FTSE 100 was higher by nearly 0.85% to close at 5530 and the DAX was up by nearly 2.50% to close around 6115.
Gold prices extended the gains on Thursday to trade now around $1759 an ounce and crude oil prices also gained to trade around $93 a barrel.
