EUROPE MARKETS: Banks Drive Losses For Europe After ECB Says It Will Keep Rates Low, Cuts Growth View

By Barbara Kollmeyer, MarketWatch , Emily Horton

ECB announces more targeted long-term loans

Europe stocks logged losses on Thursday, as heavily weighted banks fell in reaction to a surprise move by the European Central Bank to push out the prospect of a first hike in interest rate even further, even as it launched a program of new, cheap loans to the banking sector.

The actions came as the ECB slashed its economic forecasts for the eurozone, with growth worries for Europe adding to mounting concerns about the global economic picture, which weighed on equities around the world.

How are markets performing?

Losses increased throughout the day for the Stoxx Europe 600 , last down 0.6% to 373.01 after finishing flat on Wednesday.

Germany's DAX (DAX) tumbled 0.9% to 11,476.79, with the U.K.'s FTSE 100 off 0.8% to 7,135.45 and France's CAC 40 down 0.6% to 5,264.81.

Italy's FTSE MIB index tumbled 1% to 20,636.96, while Spain's IBEX 35 reversed gains to drop 0.7% to 9,235.70.

The pound fell 0.5% to $1.3104, while the euro slid 0.6% to $1.1239.

What's driving the markets?

Losses for Europe's bourses picked up speed after the ECB cut its 2019 eurozone growth forecast to 1.1% from 1.7% on Thursday after the central bank's meeting. The bank went more dovish on its interest rate intentions, vowing to keep ultralow rates on hold (http://www.marketwatch.com/story/ecb-expects-to-leave-rates-unchanged-until-at-least-2020-sets-new-round-of-long-term-loans-2019-03-07), at least through the end of 2019 and then as needed to keep inflation toward its target of near, but just below 2% over the medium term. Previously, the ECB had said it intended to keep rates on hold through the coming summer.

The bank announced a new series of quarterly, targeted long-term loans beginning in September and ending in March 2021. At a press conference that followed, ECB President Mario Draghi said the risk to the region's growth remained on the downside.

The weaker forecasts from the ECB added to investor worries over the global economy, with U.S. stocks opening lower (http://www.marketwatch.com/story/stock-futures-point-to-lower-start-ahead-of-jobless-claims-ecb-statement-2019-03-07), and Asia having had a largely weaker session.

What stocks are active?

Banks overlooked cheap loans from the ECB and tumbled on the prospect of lower rates for longer. Among those hit hardest, Banco Santander SA (SAN.MC) (SAN) fell 4%, UBS Group AG (UBS) dropped 3% and Intesa Sanpaolo SpA (ISP.MI) fell over 2%.

French bank Société Générale downgraded both Rio Tinto PLC (RIO.LN) and BHP PLC(BHP.LN), with Rio Tinto rebounding to gain 0.2%, but BHP off 0.4%.

NMC Health PLC (NMC.LN) plunged 6% after the health-care chain reported results slightly below expectations, citing wider macro challenges in a number of its business, and said these are also expected to continue into 2019.

Melrose Industries PLC (MRO.LN) announced its first steps toward breaking up engineering company GNK, after its hostile take over in 2018. This led to a 3% rise in share price, despite the FTSE 100 company announcing its losses had deepened after the acquisition.

(END) Dow Jones Newswires

March 07, 2019 10:07 ET (15:07 GMT)

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