A surprise European Central Bank rate cut sent stock markets soaring yesterday as investors tried to get ahead of the latest Greek twists and turns in the eurozone debt crisis.
Dealers said the quarter point cut to 1.25 percent was even more unexpected as it came at the first policy meeting chaired by new ECB chief Mario Draghi –known as “Super Mario” in his native Italy for his self-assured record.
The gloomy and increasingly uncertain backdrop of Greece in turmoil over its latest bailout package and rising borrowing costs for eurozone governments, including France, meant the move got a tremendous welcome on the markets which had been hoping for help from the G20 summit in Cannes, France.
“What a starter! Super Mario is jumping ahead of the curve,” said ING Belgium senior economist, Carsten Brzeski.
“It is obvious that the ECB has caught the crisis virus and is trying everything it can to prevent a full-fledged recession,” the analyst said.
In an initial burst, Paris, Frankfurt and Milan all jumped by three per cent or more, then fell back steadily before advancing strongly again by the close.
In London, the FTSE-100 index of top companies gained 1.12 per cent at 5,545.64 points. In Paris, the CAC-40 jumped 2.73 per cent to 3,195.47 points and in Frankfurt the DAX 30 added 2.81 per cent at 6,133.18 points.
In under-pressure Italy, Milan finished up 3.23 per cent while Madrid put on 1.61 per cent.
The euro fell sharply on the ECB rate cut lead but in late trade recovered to traded at $1.3787, up from $1.3746 in New York late on Wednesday.
The dollar was easier at 77.95 yen after 78.06 yen.
In New York, stocks jumped sharply at the open, helped too by news of slightly better-than-expected new jobless benefit claims data, offering a glimmer of hope on the struggling labour market.
The blue-chip Dow Jones Industrial Average was up 1.23 per cent and the tech-heavy Nasdaq Composite gained 1.34 per cent at around 1700 GMT.
“Fewer Americans applied for unemployment benefits last week, a hopeful sign that the job market might be picking up,” said analysts at Wells Fargo.
New claims for unemployment insurance fell 397,000 for the week ending October 29, down from a revised 406,000 claims the previous week.
The ECB news came as the markets firmed earlier in the day, with investors trying to get a firm lead on where the plan by Greek Premier George Papandreou for a referendum on the latest EU bail-out for Athens now stood.