Central bank action fails to cheer Europe stocks
A previous version of this story gave an incorrect maturity for one of Spain's government bond auctions. The story has been corrected.
MADRID (MarketWatch) -- European stocks ended lower Thursday, failing to find support from monetary stimulus measures from central banks in Europe and China after European Central Bank President Mario Draghi warned that risks to the economic outlook remain tilted to the downside.
The Stoxx Europe 600 index (SXXP) fell 0.2% to close at 256.93. Jarring markets were signs that the central bank won't be open to more innovative measures to help out debt markets in Spain and Italy.
Stocks in those countries bore the brunt of selling, which focused on banks--BBVA SA (BBVA) (BBVA) sank 4.6% in Madrid and
"The ECB's monetary policy easing, although unanimous and significant, amounts to little more than a 'tweaking at the edges' as far as the euro zone's ailing peripheral economies are concerned," said Nicholas Spiro, managing director of Spiro Sovereign Strategy, in emailed comments.
The European Central Bank was among several to announce action Thursday, cutting its refinance rate by 25 basis points to a record low of 0.75%. It also cut the deposit rate on money parked by banks at the ECB to zero from 0.25% and lowered the rate on its marginal lending facility to 1.5% from 1.75%.
The Bank of England kept rates on hold, but boosted its quantitative-easing program by 50 billion pounds. Almost at the same time, the People's Bank of China cut interest rates.
Some commentators said that the central-bank action Thursday was potentially a sign that the global recession was deepening.
In a news conference, Draghi said he sees downside risks for euro-area economies. ECB cuts rates; BOE boosts quantitative easing
Mike Ingram, markets commentator at BGC Brokers, said he was among those looking for more "urgency" from the central bank in addressing the crisis, following last week's European Union summit.
"We were finally starting to get momentum behind the political agenda, but Draghi dropped the ball," he said. "A lot hinges on just keeping things moving, but we now worry we could have a situation like last year, where policy makers go on holiday, congratulate themselves and come back and markets are a mess."
The euro (EURUSD) hit a five-week low against the dollar.
"It may be something very simple as the U.S. came back after a holiday and took another look and decided it wasn't looking good," said Ingram. He added that markets are likely to see Federal Reserve action in a few weeks, but it may come too late.
Peripherals hard hit
Spain's IBEX 35 index (IBEX) sank 3% to 6,954.20, as banks tumbled and bond yields surged. Stocks had moved lower Wednesday in the midst of speculation that the country's bank-bailout funds could suffer a delay.
The yield (10YR_ESP) on Spain's 10-year government bond soared 39 basis points to 6.74%, according to Tradeweb. Yields were moving up earlier even as the Spanish government sold €3 billion of bonds with maturities of three, five and 10 years, hitting the top of its target range. But it also saw borrowing costs rise for the longer-dated debt.
Italy was also feeling the pain, with the FTSE MIB index (I945) down 2% to 14,088.74, led by a swathe of banks.
Autos were among those holding the line on gains, however, with shares of Volkswagen AG (VOW3) jumping more than 5% after it said it would take over in August the portion of Porsche Automobil Holding SE (PAH3) that it doesn't already own. Porsche shares fell 1.2%.
Miners stayed firmer in London, helping that index to buck the losing trend across Europe. China is a big user of natural resources, and signs that the country is trying to stimulate growth can be positive for those stocks.
The FTSE 100 index (UKX) rose 0.1% to 5,692.63 as shares of