Euro drops, stocks rise as European Central Bank vows to keep rates low

Euro drops, stocks rise as European Central Bank vows to keep rates low

Markets are on the lookout for clues from Bank of Japan governor Haruhiko Kuroda's post-meeting briefing at 6.30am GMT on how long the central bank could hold off on whittling down stimulus given stubbornly weak inflation.

This was despite the European Central Bank announcing it would wind down its stimulus programme by the end of 2018, an event which many analysts had predicted would be supportive of the Euro. The ECB also said interest rates would remain unchanged at their current record lows at least until the middle of 2019.

The European Central Bank announced on Thursday that it will bring to an end the €2.5 trillion (more than R31 trillion) bond buying programme it has undertaken since the eurozone debt crisis.

The US Dollar Index (DXY) ended the day around 94.85, the highest it had been since May 29, 2018, and the highest it has been since late October 2017.

Growth slowed in early 2018, at 0.4 percent between January and March compared with 0.7 percent in the previous three months.

Oil prices were little changed as investors eyed a key Organisation of Petroleum Exporting Countries meeting in Vienna.

West Texas Intermediate (WTI) crude oil futures were down 0.3 percent at $66.69 per barrel; Brent was down 1 percent at $75.20.

Benefiting from the ECB's decision were stock markets on both sides of the Atlantic. However, initial estimates suggest that in May the rate jumped to 1.9% from 1.2% in April.

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"The hawks had been guiding for a June hike before the meeting and given the clear guidance the European Central Bank gave today on interest rates, it had to be priced out", said AFS Group analyst Arne Petimezas based in Amsterdam. "It doesn't seem like we're at the stage where the hawks are on top of things".

The Dow Jones Industrial Average fell 7.94 points, or 0.03 percent, to 25,193.26, the S&P 500 gained 7.6 points, or 0.27 percent, to 2,783.23 and the Nasdaq Composite added 62.69 points, or 0.81 percent, to 7,758.39.

Technology stocks were the biggest advancers, with Facebook and Alphabet leading the pack.

The 30-year bond last rose 21/32 in price to yield 3.0696 percent, from 3.102 percent Wednesday. The latter is threatening to break off trade talks if the US continues to impose tariffs on the world's second largest economy.

According to reports, U.S. President Trump has made up his mind to impose "pretty significant" tariffs on Chinese goods, an administration said on Thursday, as Beijing warned that it was ready to respond if Washington chose to ratchet up trade tensions.

We think that there is more uncertainty than usual around this week's meeting.

CBOT July corn fell to its lowest since mid-January and front-month soybeans dipped to a 9-1/2 month low. Even though China and the USA probably want to negotiate, "the risks are high and the tariffs could well be implemented before the issue is resolved". Many markets in Asia were closed on Friday for holidays celebrating the end of Ramadan.

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