Reuters: US Dollar Report: GLOBAL MARKETS-Stocks, euro tumble as ECB disappoints markets

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GLOBAL MARKETS-Stocks, euro tumble as ECB disappoints markets Aug 2nd 2012, 15:29 Thu Aug 2, 2012 11:29am EDT * Stocks, euro fall as ECB disappoints markets * Safe-haven Treasuries rise, oil slips * Markets still expect Fed, ECB action in coming months By Steven C. Johnson NEW YORK, Aug 2 (Reuters) - U.S. stocks and the euro tumbled o n T hursday after the European Central Bank disappointed investors who were hoping for immediate action to combat the euro zone debt crisis. The ECB signaled plans to push down borrowing costs for euro zone countries through upcoming bond purchases, though the move is likely weeks away The central bank, which also said it would wait to see if the euro zone economy slows further before cutting interest rates, said last week it would do whatever it takes to support the euro. The U.S. Federal Reserve took a similar wait-and-see approach o n W ednesday and did not announce any new stimulus measures to help revive a flagging U.S. recovery. A government employment report on Fri day is expected to show the U.S. economy added 100,000 jobs in July, not enough to lower the 8.2 percent jobless rate. ECB President Mario Draghi "set us up like a poker room full of suckers," said Todd Schoenberger, managing principal at the BlackBay Group in New York. "We were all expecting a shock-and-awe moment. ... It's going to be a rough day on Wall Street." The Dow Jones industrial average was down 112.69 points, or 0.87 percent, at 12,858.37. The Standard & Poor's 500 Index was down 12.90 points, or 0.94 percent, at 1,362.24. The Nasdaq Composite Index was down 7.89 points, or 0.27 percent, at 2,912.32. The euro, which had rallied above $1.24, retreated sharply to $1.2140, its worst showing in a week. U.S. Treasuries rose after the ECB announcement, with the benchmark 10-year note up 15/32 to yield 1.47 percent. Spanish and Italian government bond yields rose while European shares extended losses, with the FTSEurofirst 300 index down 0.8 percent The MSCI world equity index fell 1 percent. Reuters reported on Monday that the ECB was considering re-activating its Securities Markets Programme to buy Spanish bonds in tandem with the euro zone's rescue funds, but that action could be at least five weeks away. Since Draghi surprised markets last week with a promise to save the euro, European shares had rallied by as much as 5 percent, the euro has risen about a cent against the dollar and yields on Italian and Spanish debt had fallen sharply. Some said Draghi's comments, while disappointing, suggest the ECB is serious about helping indebted countries such as Spain and Italy and stopping the crisis from worsening. "What he said was pretty significant. He seems to have laid the groundwork for substantial policy action," said Andrew Wilkinson, chief economic strategist at Miller, Tabak & Co. "It wouldn't surprise me if we get a risk rally in the days ahead." Spain had to pay higher yields than a month ago on its 10-year bonds at an auction o n T hursday, but it easily sold 3.1 billion euros of debt with yields far lower than indicated last week before Draghi's announcement that he would do whatever it takes to save the euro. In the United States, investors are still expecting the Fed to announce another round of asset purchases to help inject life into a flagging recovery, though that likely will not happen until September. Data on Thursday showed the number of Americans filing initial claims for unemployment benefits rose slightly in the latest week, though not as much as economists had expected. Brent crude oil reversed early losses, rising 37 cents to $106.34 a barrel, while U.S crude fell 80 cents to $88.11. Spot gold fell $3.98 to $1,594.60. Link this Share this Digg this Email Reprints

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