Euro slips on ECB comments, stocks fall
San Francisco (Apr 3) The euro fell on Thursday after the European Central Bank pledged to use unconventional measures if needed to battle low inflation, and a global gauge of stocks dipped after touching a six-year high.
Brent crude rallied more than 1 percent, bouncing from a five-month low, on doubts a standoff in Libyan ports will be resolved soon.
The ECB, as expected, kept its main interest rate at a record low of 0.25 percent and the rate for bank deposits at central banks at zero, but comments from its president, Mario Draghi, weighed on the single currency.
Draghi told a news conference that he and his colleagues expected a period of low inflation, and that action would be taken if it dragged on too long.
"The ECB is being slightly more dovish than the market expected," said Kathy Lien, managing director at BK Asset Management in New York. "The main takeaway is that the council is considering unusual techniques, and that's negative for euro/dollar."
On Wall Street, major stock indexes fell after the Dow and the S&P 500 hit intraday record highs shortly after the open. Reluctance to make big bets ahead of Friday's payrolls report translated into profit taking in so-called momentum stocks, and the Nasdaq Composite was hardest hit among main indexes.
U.S. data was mixed, with the services sector showing growth, but some employment components flashed weakness. The number of Americans filing new claims for unemployment benefits rose more than expected last week.
Other data showed the U.S. trade deficit unexpectedly widened in February suggesting weaker-than-anticipated first-quarter growth.
The Dow Jones industrial average fell 38.69 points or 0.23 percent, to 16,534.31, the S&P 500 lost 7.6 points or 0.4 percent, to 1,883.3 and the Nasdaq Composite dropped 58.677 points or 1.37 percent, to 4,217.779.
"Momentum names are usually the ones that take the quickest hit when investors get anxious or worried, in this case, a bit of hesitancy ahead of tomorrow's payrolls," said Randy Frederick, managing director of trading and derivatives at the Schwab Center for Financial Research in Austin, Texas.
Both the S&P and Dow hit intraday record highs.
MSCI's global equities gauge slipped 0.3 percent after touching its highest level since December 2007.
Overnight, MSCI's broadest index of Asia-Pacific shares outside Japan touched its highest in more than four months and Japan's Nikkei jumped 0.8 percent to a three-week peak.
BOND PRICES, DOLLAR FIRM
Longer-dated U.S. Treasuries yields edged lower after the jobless claims data, causing some jitters ahead of Friday's release of the government's nonfarm payrolls report for March.
"The reaction to the data might be more significant if we didn't have a more important data print tomorrow," said Jake Lowery, portfolio manager for global rates at ING U.S. Investment Management in Atlanta.
Nonfarm payrolls probably increased by 200,000 in March, the largest gain in four months, according to a Reuters poll of economists.
The 30-year Treasury bond rose 18/32 in price to yield 3.618 percent, compared to a yield of 3.649 percent late on Wednesday. The benchmark 10-year U.S. Treasury note was up 5/32 in price to yield 2.784 percent.
In Europe, France and Spain sold a combined 13.1 billion euros of bonds on Thursday in auctions that drew strong demand from investors, while Greece lined up a group of banks to manage its first new bond sale since the country restructured its debt two years ago. Benchmark Greek and Portuguese yields hit a four-year low.
In currencies, the euro was last off 0.4 percent against the dollar at $1.3709. Against the Japanese currency , the dollar was little changed after earlier trading above 104 yen for the first time since Jan. 23.
In commodities markets, gold and copper prices were weighed by the strength in the greenback. Spot gold fell 0.3 percent to $1,285.30 an ounce, and three-month copper on the London Metal Exchange was down 0.5 percent at $6,639.