Markets unimpressed by Draghi promises

Trader William McInerney, center, works on the floor of the New York Stock Exchange Tuesday, July 31, 2012. U.S. stocks are opening mostly lower ahead of a two-day policy meeting at the Federal Reserve. (AP Photo/Richard Drew)

Trader William McInerney, center, works on the floor of the New York Stock Exchange Tuesday, July 31, 2012. U.S. stocks are opening mostly lower ahead of a two-day policy meeting at the Federal Reserve. (AP Photo/Richard Drew)

LONDON (AP) ? Financial markets were unimpressed on Thursday 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."

In Europe, Germany's DAX was down 1.1 percent at 6,680 while the CAC-40 in France fell 1.3 percent to 3,278. The FTSE 100 index of leading British shares was down 0.3 percent at 5,696.

The euro was 0.5 percent lower at $1.2186, while the yield on Spain's 10-year yield spiked to 6.95 percent, not far off the 7 percent level that is considered unsustainable in the long run. The country's main stock market also took a big hit, trading 2.7 percent lower.

In the U.S., the Dow Jones industrial average was down 0.3 percent at 12,937 while the broader S&P 500 index fell the same rate to 1,372.

Markets have been hugely 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 markets turned lower.

Draghi told the press briefing after the ECB held its main interest rate at 0.75 percent that the bank can intervene in the bond market to drive down high interest rates.

He insisted the euro currency was irreversible and promised to address investor concerns that the ECB will be repaid ahead of other investors on any bonds it holds.

Draghi also said the ECB would consider other emergency measures over the weeks to come. Though many analysts think that could mean the ECB could inject new money in the financial system, it's not a done deal ? Germany's Bundesbank is likely to remain opposed.

"Draghi looked like a man defeated in the press conference, which came shortly after his meeting with the Jens Weidmann, head of the Bundesbank," said Craig Erlam, market analyst at Alpari. "Today's conference really has shown who is king."

Hopes that the ECB will back new measures were stoked a week ago when Draghi vowed to do what it takes to save the euro. Many expected the bank at the very least to resume its bond-buying program to keep a lid on Spain's and Italy's borrowing costs.

"It feels safe to say that what we have witnessed in the last week has not been the best central bank expectations management," said Alan Ruskin, an analyst at Deutsche Bank.

Earlier in Asia, Japan's Nikkei 225 stock average finished up 0.4 percent at 8,653.18 while Hong Kong's Hang Seng dropped 0.7 percent to 19,690.20. South Korea's Kospi shed 0.6 percent to 1,869.40 and China's Shanghai Composite fell 0.6 percent to 2,111.18.

Oil markets slid alongside equities? benchmark crude for September delivery was down $1.14 at $87.77 a barrel in electronic trading on the New York Mercantile Exchange.

Associated Press

Source: http://hosted2.ap.org/APDEFAULT/f70471f764144b2fab526d39972d37b3/Article_2012-08-02-World%20Markets/id-953ec127b659478a8612fb1a3de36fd9

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