European Markets Finished Mixed After Surprise ECB Rate Cut

(RTTNews) - The European markets finished Thursday's session with mixed results. The markets initially rallied after the ECB unexpectedly decided to reduce its interest rate, but then weakened in late trade. Meanwhile, the Bank of England left its interest rate unchanged, as had been expected. Investors were also confronted with a large number of earnings reports on Thursday. All will be watching for the release of the U.S. jobs report for October on Friday.

The European Central Bank sprung a surprise on Thursday by cutting the key interest rate to a record low in November, yielding to intense market speculation for such a move, given the combination of low inflation, record unemployment and a stronger currency.

The Governing Council, led by ECB President Mario Draghi, cut the main refinancing rate by 25 basis points to record low 0.25 percent, following the rate-setting session in Frankfurt. Previously, the bank slashed the rate by a quarter-point in May, which was the first reduction in nine months.

The bank also cut the marginal lending facility rate by a quarter-point to 0.75 percent. The previous change was a 50 basis points cut in May. The zero deposit rate was left unchanged.

Economists had expected the ECB to leave rates unchanged in November, with some calling it 'premature', though there was intense speculation for a rate cut.

Eurozone interest rates were reduced on Thursday as the economy is likely to face a prolonged period of low inflation, but no deflation, the European Central Bank President Mario Draghi said on Thursday.

"We may experience a prolonged period of low inflation, to be followed by a gradual upward movement towards inflation rates below, but close to, 2% later on," Draghi said in his introductory statement during the customary post-decision press conference in Frankfurt.

"Accordingly, our monetary policy stance will remain accommodative for as long as necessary."

Underlying price pressures and credit dynamics are also seen subdued, while inflation expectations continue to be firmly anchored in line with the ECB's inflation target, he said.

"The Governing Council reviewed the guidance today after the rate cut and confirmed that it continues to expect the key ECB interest rates to remain at present or lower levels for an extended period of time," Draghi said.

Saying that the bank is ready to consider all available instruments, Draghi announced that the ECB will continue conducting the main refinancing operations (MROs) as fixed rate tender procedures with full allotment for as long as necessary.

The bank also decided to conduct the three-month longer-term refinancing operations (LTROs), to be allotted until the end of the second quarter of 2015, as fixed rate tender procedures with full allotment.

The Bank of England kept its key rate at the current record low level as the bank had pledged not to raise rates until the jobless rate falls to 7 percent. Moreover, knock-out conditions of the forward guidance have not materialized so far in the economy.

The nine-member monetary policy committee governed by Mark Carney concluded the two-day rate setting meeting by retaining the key rate at 0.50 percent and the size of monetary stimulus at GBP 375 billion. The outcome of the meeting came in line with expectations.

British economic growth moderated in the three months ending October, a monthly report from the National Institute of Economic and Social Research, or NIESR, showed Wednesday. The gross domestic product grew 0.7 percent in the three months ending in October after growth of 0.8 percent in the three months ending in September 2013, the think-tank said in its monthly GDP estimate.

The Euro Stoxx 50 index of eurozone bluechip stocks declined by 0.37 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, added 0.03 percent.

The DAX of Germany climbed by 0.44 percent, but the CAC 40 of France decreased by 0.14 percent. The FTSE 100 of the U.K. dropped by 0.66 percent, but the SMI of Switzerland rose by 0.06 percent.

In Frankfurt, HeidelbergCement declined by 3.79 percent. The company announced quarterly results.

Munich Re, which reported a fall in quarterly profit, fell by 1.94 percent. Deutsche Telekom, which turned a profit in the third quarter, lost 2.28 percent.

Commerzbank surged by 10.10 percent, after the lender reported a higher quarterly profit.

Siemens rose by 3.38 percent. The firm plans to carry out a share buyback of up to 4 billion euros within the next 24 months.

Continental increased by 6.77 percent. The tire maker reported a higher profit for the first nine months of the year.

In Paris, Veolia Environnement, which reported 9-month sales, advanced by 3.52 percent.

Cap Gemini climbed by 4.74 percent, ArcelorMittal rose by 5.27 percent, while lenders Credit Agricole and Societe Generale finished up by 3.99 percent and 3.04 percent, respectively. All firms reported quarterly results.

In London, Randgold Resources surged by 5.90 percent. The firm reported third-quarter results.

Schroeders dropped by 4.38 percent, despite a third quarter report that was largely in line with expectations.

Tate & Lyle dipped by 0.32 percent. The company reported an increase in revenues for the first half of the year and increased its dividend.

Swiss Re climbed by 1.94 percent in Zurich. The reinsurer said capital management measures such as a special dividend are possible.

Germany's industrial production declined 0.9 percent in September from August, data from the Federal Ministry of Economics and Technology showed Thursday. Production was forecast to remain flat in September after rising by revised 1.6 percent in August.

German construction sector expanded for a sixth month running in October, driven by solid growth in work on commercial projects, a survey by Markit Economics revealed Thursday. The headline purchasing managers' index, a measure of the construction sector performance, rose to 52.6 in October from 52.1 in September.

Spanish industrial production bounced back in September, ending 29 months of successive declines as the economy emerged from a prolonged recession in the third quarter, data from the statistical office INE revealed Thursday. On a calendar adjusted basis, production grew 1.4 percent year-on-year, following a 2.1 percent decline in the previous month. This was the first increase in output since February 2011.

Economic activity in the U.S. grew by more than anticipated in the third quarter, according to a report released by the Commerce Department on Thursday. The report said U.S. gross domestic product rose by 2.8 percent in the third quarter compared to economist estimates for an increase of 2.0 percent.

First-time claims for U.S. unemployment benefits fell for the fourth consecutive week in the week ended November 2nd, with claims coming in roughly in line with economist estimates. A report released by the Labor Department on Thursday said initial jobless claims fell to 336,000, a decrease of 9,000 from the previous week's revised figure of 345,000.

Economists had been expecting jobless claims to dip to 335,000 from the 340,000 originally reported for the previous week.