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The euro and bond yields in the currency bloc spiked and shares stumbled on Thursday after the European Central Bank stuck to its line that it will judge early in 2015 whether more action is needed to revive the Euro zone economy. Markets had been hoping for firmer details on if and when the central bank will take the radical step of printing money to buy government bonds.
President Mario Draghi said the ECB had been stepping up technical preparations for new measures, and that there was no need for unanimity within the ECB to launch money-printing quantitative easing, or QE. But despite issuing new forecasts spelling out the Euro zone's deepening economic malaise, the central bank announced no new immediate measures on Thursday.
European markets recoiled in disappointment dropping over 1 per cent, and the S&P 500 and Dow Jones Industrial opened 0.1-0.2 per cent lower, having originally been expected.
“He cut inflation and GDP estimates and postponed monetary stimulus. It couldn't go worse than that,” said Vincenzo Longo, a strategist with IG in Milan.
The ECB is waiting to see the impact of measures it has already lined up — it hopes banks will mop up a new flood of ultra-cheap loans next week — and Draghi said on Thursday it would review its options again “early next year”.
The euro bounced almost a full cent back up to $1.24 at one point and yields of debt from the Euro zone's indebted southern states, but also core members like Germany, all climbed briskly as investors reevaluated the timing of potential new stimulus.
At the same time the dollar was also moving higher and after flirting with the idea for most of the day broke through 120 yen for the first time since July 2007 following some robust jobless claims data. Non-farm payrolls are due on Friday.
Expectations of more stimulus from other global central banks helped cushion to disappointment from the ECB.
Overnight in Asia, Chinese stocks took their biggest leap in over two years as traders wagered Beijing will continued cutting rates next year.
Signs that stimulus-happy Shinzo Abe's coalition was heading for victory in Japan's upcoming elections meanwhile pushed the Nikkei to a near 7-1/2 year high and left the yen tantalisingly close to 120 yen to the dollar.
“There's activity in anticipation of extremely promising conditions being born,” said Hiroyuki Nakai, chief strategist at Tokai Tokyo Research Center Co in Tokyo.
As Wall Street opened, the Dow Jones industrial average fell 23.18 points, or 0.13 per cent, to 17,889.44, the S&P 500 lost 3.74 points, or 0.18 percent, to 2,070.59, and the Nasdaq Composite lost 0.1 per cent.
Elsewhere, battered oil prices steadied at just under $70 a barrel after an overnight bounce and gold managed to keep above $1,200 an ounce even as the dollar neared a 5-1/2-year high. Gold like most commodities is priced in dollars.
The oil bounce had brought some temporary relief to Russia's battered rouble but it resumed its slide after Vladimir Putin blamed the West for “pure cynicism” over Ukraine.
There were clear hints, however, that he was ready to take measures to prevent any further damage to the rouble which has now lost almost 40 per cent since June.
“I ask the central bank and the government to carry out tough coordinated action to fight off the desire of the so-called speculators to play on the fluctuations of the Russian currency,” he said.
“The authorities know who these speculators are and has instruments to influence them. The time has come to use those instruments.”
