Text size:

  • Small
  • Normal
  • Large
WMarkets veer sharply as the European Central Bank cuts interest rates, then slashes its growth forecasts for 2012 as a crucial eurozone summit approaches. REUTERS/Ralph Orlowski
RALPH ORLOWSKI
WMarkets veer sharply as the European Central Bank cuts interest rates, then slashes its growth forecasts for 2012 as a crucial eurozone summit approaches. REUTERS/Ralph Orlowski

Stocks drop as ECB cuts interest rates

Euro Zone: Markets veer sharply as the European Central Bank cuts interest rates, then slashes its growth forecasts for 2012 as a crucial eurozone summit approaches.

Stock markets across Europe plummeted yesterday after the European Central Bank (ECB) cut interest rates and extended a lifeline to struggling euro-zone lenders, before slashing growth forecasts and warning that leaders must act to tackle looming debt.

European equities spiked before Mario Draghi, the ECB's president, began to speak at a press conference in Frankfurt to announce a cut in interest rates to 1 per cent.

But the announcement of a lifeline to struggling euro-zone lenders had no sooner left his lips than markets sank like a stone. The leaders of France and Germany compounded matters as they warned that urgent measures were needed to save the 17-nation currency union.

In a press conference in Frankfurt, Mr Draghi said the ECB would adopt "non-standard" measures to aid banks, including offering free three-year loans and reducing restrictions on the assets that banks can hold as collateral.

Meanwhile, at a conference taking place at the same time in Marseille, Nicolas Sarkozy, the French president, warned that Europe was "in danger" and that France and Germany must work together to find a solution and restore confidence.

"We need more solidarity in the euro zone and more discipline," he said. "If we don't have an agreement on Friday, there'll be no second chance."

Angela Merkel, Germany's chancellor, said that there was no "big-bang" solution to the euro zone's crisis and that a resolution would require years of hard work.

The easing of rates comes as the EU begins a summit today where leaders will announce policy measures intended to stave off a collapse in confidence in the euro.

European equities plunged as the ECB slashed economic growth estimates for next year to 0.3 per cent from 1.3 per cent.

The FTSE 100 fell 0.1 per cent to 5,537.16 and Germany's DAX Index slumped 1.2 per cent to 5,919.90, while France's CAC 40 fell 1 per cent to 3,142.02. The euro fell 0.4 per cent to reach US$1.3332.

The rate cut, the second in as many months by the ECB, reversed increases made under the bank's previous president, Jean-Claude Trichet.

The ECB moved to head off a growing "collateral crunch" among European lenders. The ECB also cut banks' reserve ratios, the minimum quantities of deposits that banks must hold, to 1 per cent from 2 per cent.

ghunter@thenational.ae

twitter: Follow and share our breaking business news. Follow us

Back to the top

More articles


Editor's Picks

 The Greens, villas: Q1 no change. 3BR - Dh210-250,000. 4BR - Dh210-260,000. 5BR - Dh220-300,000. Q1 2013-Q1 2014 5% rise. Pawan Singh / The National

In pictures: Where Dubai rents have risen and fallen, Q1 2014

Find out how rental prices in the prime locations in Dubai have altered during the first three months of the year and the current rates you will pay according to data provided by Asteco.

 Miele coffee maker making Cappuccino at Miele Gallery in Sama Tower in Dubai. The cost of this coffee maker is around Dh 17,000. Pawan Singh / The National

Space-age coffee comes at a price from Miele

Miele have taken the coffee machine to a new level with its Dh17,000 offering that is built into your kitchen.

 The bridge of Seajacks Hydra, as the wind farm installation vessel undergoes finishing touches and testing works at Lamprell’s Hamriyah facility in Sharjah before its planned delivery on June 2, 2014. Jeffrey E Biteng / The National

In pictures: Building the Seajacks Hydra

The Seajacks Hydra, a wind farm installation vessel, is undergoing finishing touches and testing works at Lamprell’s Hamriyah facility in Sharjah before its planned delivery on June 2, 2014.

 The Wind, Energy, Technology and Environment Exhibition takes place from April 14 to April 16. Above, the Dewa showroom during last year’s Wetex. Jaime Puebla / The National

April corporate and economic calendar for the UAE and overseas

From Cityscape to Wetex to stock-market holidays to nations reporting first-quarter GDP figures, here is our helpful calendar of April's business events in the UAE and internationally.

 The rush of new supply of hotel rooms pushed Dubai occupancy rates down to 87 per cent. Sarah Dea / The National

Dubai hotel room rates rise 10 per cent

The rush of new supply pushed occupancy rates down to 87 per cent, a dip of 2.6 per cent from the previous year. Winter months are the strongest for Dubai hotels, with occupancy and prices falling to half their peaks by July.

 Get the latest information on credit cards, bank accounts and loan products in the UAE. Mark Lennihan / AP Photo

Rates report: Latest on UAE loans, accounts and credit cards

Souqamal.com brings you the latest interest rates on banking products in the UAE.

Events

To add your event to The National listings, click here

Get the most from The National