European Shares Seen Opening Down; US Jobs Data Awaited
European markets were called to open lower on Friday after new stimulus measures announced by central banks failed to inspire investor confidence and markets waited for a crucial U.S. employment report.
The FTSE was seen opening 18 points lower at 5675, the DAX was called to open 30 points lower at 6506 and the CAC 40 was expected to open down 24 points at 3205.
China, the euro zone and the U.K. all loosened monetary policyon Thursday with all three of the announcements coming within an hour, in a sign of continuing concern over the slowing of the global economy.
While the actions by the European Central Bank (ECB), which lowed the headline euro zone interest by 25 basis points to 0.75 percent, and the U.K.’s Bank of England (BoE), which injected a further 50 million pounds into the U.K. economy, were expected, the People’s Bank of China (PBOC), China’s central bank, surprised the markets by lowering its lending rate by 31 basis points to 6 percent.
The move came immediately after the BoE announcement and is the second time in as many months China’s central bank has lowered interest rates.
ECB President Mario Draghi denied the action had been coordinated by the central banks or that the economic situation was now as bad as it had been at the height of the financial crisis in 2008. He also signaled no further monetary easing for the foreseeable future.
But his comments failed to convince the markets. The FTSE Eurofirst 300 ended the day lower by 0.1 percent at 1,044.73 points having initially risen to a fresh 2-year high of 1,054.02 earlier on the action by the banks.
Spanish and Italian sovereign bond yields rose following Draghi’s press conference. Italian 10-year yields jumped 26 basis points higher on the day at 6.04 percent, while equivalent Spanish yields were up 45 basis points at 6.86 percent.
Bad loans at Italy's biggest lender UniCredit are still rising, its chief executive said on Thursday, adding weight to Draghi’s bleak assessment of prospects for the euro zone. Shares in UniCredit had to be suspended after falling more than 7 percent, and closed down 5.13 percent.
In the UK, the government won a key vote to hold a parliamentary inquiry into the London interbank offered rate (Libor) manipulation scandal after dramatic scenes in the House of Commons which saw Chancellor George Osborne trade insults and accusations with his opposite number. The opposition Labour party had called for a wider judicial inquiry into banking practices as a whole.
In the U.S. the Labor Department’s monthly non-farm payroll data for June will be watched closely by investors for any signs that the euro zone crisis is dragging down the world’s largest economy when the figures are released at 2:30 pm (CET). A poll of analysts for Reuters forecast the number of jobs created in the month to rise to 90,000 from May’s figure of 69,000.
Roche's cancer drug Avastin has been rejected by Britain's healthcare cost agency as a first-line treatment for advanced breast cancer, in the latest in a series of setbacks for the drug treatment.