European Markets Dropped After ECB Rally Fizzled

(RTTNews) - European markets were range-bound in early trade Thursday, as investors remained cautious ahead of today's announcement from the European Central Bank. The markets rallied higher after the stimulus package announced by the ECB proved more extensive than expected.

However, those gains proved short-lived as investors took the opportunity to lock in some profits. The European markets continued to pare their gains in the afternoon and dropped into negative territory. Weakness in crude oil prices also contributed to the late day sell-off.

The European Central Bank delivered more than what markets hoped by cutting its benchmark interest rate to zero and expanding its asset purchases, among other steps.

The bank also announced a new round of longer-term financing operations and decided to include non-bank debt in its list of eligible assets for purchases.

In its policy session in Frankfurt on Thursday, the 25-member Governing Council lowered its benchmark interest rate, the main refinancing rate, by five basis points to a record low zero percent. Economists had expected the rate to be left unchanged.

The already-negative deposit rate was cut by 10 basis points to -0.40 percent. The decision was in line with economists' expectations.

The marginal lending facility rate was reduced by five basis points to 0.25 percent. Economists had expected the rate to be held steady.

Further, the bank expanded the monthly purchases under the asset purchase programme by EUR 20 billion to EUR 80 billion starting in April. Economists were looking for an increase of at least EUR 10 billion.

The ECB also decided to include investment grade euro-denominated bonds issued by non-bank corporations in the euro area in the list of assets that are eligible for regular purchases.

Additionally, the bank announced a new series of four targeted longer-term refinancing operations (TLTRO II), each with a maturity of four years. These will start in June.

Borrowing conditions in these operations can be as low as the interest rate on the deposit facility, the bank said.

The Euro Stoxx 50 index of eurozone bluechip stocks decreased 1.51 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, lost 1.63 percent.

The DAX of Germany dropped 2.31 percent and the CAC 40 of France fell 1.70 percent. The FTSE 100 of the U.K. declined 1.78 percent and the SMI of Switzerland finished lower by 1.03 percent.

In Frankfurt, Volkswagen lost 3.27 percent after its top U.S. executive Michael Horn left the company to pursue other opportunities. Daimler also declined 4.15 percent and BMW fell 3.72 percent.

Fertilizer maker K+S tumbled 9.72 percent after flagging sales and earnings drop in 2016.

Hugo Boss rose 0.20 percent on news the troubled retailer plans to close stores in China as part of cost-cutting efforts.

Reinsurer Hannover Re climbed 1.08 percent after reporting a rise in FY15 profit and hiking dividend.

In Paris, media group Lagardère sank 13.27 percent after it confirmed the exit of its long-serving finance director.

Retailer Carrefour fell 6.53 percent after its 2015 profit declined, hurt by restructuring charges.

Renault decreased 4.82 percent and Peugeot weakened by 3.71 percent.

In London, Aviva jumped 1.35 percent. The insurance giant hiked dividend after delivering "highly satisfactory" results for 2015 amid a "backdrop of market volatility."

Amec Foster Wheeler increased 1.90 percent. The company reported a loss for the year from continuing operations of 253 million pounds compared to profit of 106 million pounds last year.

Wm Morrison Supermarkets dropped 4.50 percent. The company's full year underlying earnings per share was 7.8 pence compared to 10.9 pence. The proposed final dividend is 3.50 pence, bringing the full year to 5.00 pence.

Germany's exports dropped unexpectedly at the start of the year suggesting that weak demand from emerging economies, especially China, weighed on foreign demand, while imports growth exceeded expectations.

Exports fell 0.5 percent month-on-month in January, following a 0.7 percent drop in December, Destatis reported Thursday.

This was the second consecutive decrease in shipments. Economists had forecast exports to recover in January by expanding 0.8 percent.

Meanwhile, imports grew 1.2 percent from December, when it fell 1.6 percent. The pace of growth was faster than an expected 0.8 percent.

As a result, the trade surplus decreased to a seasonally adjusted EUR 18.8 billion from EUR 20.3 billion in the previous month.

French industrial production recovered at a faster than expected pace in January, the statistical office Insee reported Thursday. Industrial output grew 1.3 percent month-on-month, reversing a 0.6 percent fall in December. Economists had forecast a 0.8 percent increase. This was the fastest growth in five months.

French payroll employment increased notably in the fourth quarter, the statistical office Insee said Thursday. Employment in non-farm sectors rose 31,800 compared to an increase of 12,900 in the third quarter. Excluding temporary work, employment increased slightly by 12,900.

The U.K. grew at a slightly slower pace in the three months to February, the National Institute of Economic and Social Research said Wednesday. Output climbed 0.3 percent in the three months ended February after logging a growth of 0.4 percent in the three months to January period.

The monthly house price balance in the United Kingdom climbed to 50 percent in February, the Royal Institution of Chartered Surveyors said on Thursday. That was in line with expectations, and it was up from the downwardly revised 48 percent in January.

China's inflation accelerated at the fastest pace since July 2014 reflecting a surge in food prices amid Lunar New Year holidays. Consumer prices increased at a faster pace of 2.3 percent year-on-year in February following a 1.8 percent rise in January, the National Bureau of Statistics said Thursday.

Inflation rose to the fastest since July 2014, while it was forecast to remain unchanged at 1.8 percent. Still inflation remains below the full-year target of 3 percent.

After reporting modest increases in first-time claims for U.S. unemployment benefits in the two previous weeks, the Labor Department released a report on Thursday showing that initial jobless claims pulled back by much more than expected in the week ended March 5th.

The Labor Department said initial jobless claims dropped to 259,000, a decrease of 18,000 from the previous week's revised level of 277,000. Economists had expected jobless claims to edge down to 272,000 from the 278,000 originally reported for the previous week.