By Carla Mozee and Sara Sjolin, MarketWatch
So far, 'limited' effects from negative rates, says ECB's
Draghi
Most major European stock markets closed out a choppy session
slightly lower, with investors staying on the sidelines ahead of
the Federal Reserve minutes due later in the day.
Dovish comments from European Central Bank President Mario
Draghi did little to pull markets out of their narrow trading
ranges.
Among benchmarks, Germany's DAX ended 0.1% lower at 12,642.87
and Italy's FTSE MIB declined 0.2% to 21,369.73. France's CAC 40
index fell 0.1% to 5,341.34.
However, the U.K.'s FTSE 100 rose 0.4% to 7,514.90
(http://www.marketwatch.com/story/mining-retail-shares-tug-ftse-100-slightly-into-the-red-2017-05-24),
helping lift the Stoxx Europe 600 0.1% to close at 392.37.
"We have not seen any major moves today as dealers are waiting
to see the minutes from the Federal Reserve meeting earlier this
month," said David Madden, market analyst at CMC Markets, in a
note.
"Investors will use the update to try to determine how likely
the Federal Reserve is to increase interest rates next month," he
added.
The minutes will be released at 7 p.m. London time, or 2 p.m.
Eastern Time. Investors have largely priced in a rate hike by the
Fed at its June 13-14 meeting.
Read:Fed minutes may quell doubt about a June interest-rate hike
(http://www.marketwatch.com/story/fed-minutes-may-quell-fresh-doubts-about-a-june-rate-hike-2017-05-19)
China cut: Investors entered Wednesday's session with a
downgrade of China's credit rating at Moody's for the first time in
nearly 30 years
(http://www.marketwatch.com/story/moodys-downgrades-china-rating-for-the-first-time-in-nearly-30-years-2017-05-24),
to A1 from Aa3. Moody's cited concerns about the impact that rising
levels of debt will have on the world's second-largest economy,
which is a major buyer of industrial and precious metals.
Some mining shares were lower after the downgrade, but pared
losses into the close, with Fresnillo PLC (FRES.LN) down 0.4% and
iron ore heavyweight Rio Tinto PLC (RIO) (RIO) (RIO) off 0.5%.
Boliden AB (BOL.SK) lost 0.3% and Norwegian aluminum company Norsk
Hydro ASA (NHYDY) gave up 0.2%.
Investors have already been aware of China's credit-expansion
issue, said Mark Williams, chief China economist at Capital
Economics, in note.
"The greater concern, in our view, is not what the debt buildup
is doing to government creditworthiness. Instead, it is that loose
credit policies designed to prevent struggling firms from failing
are eroding the economy's long-run growth potential by preventing
resources from being allocated to areas where they could be used
more efficiently," he wrote.
Central banks: There's been "an increasingly solid recovery" in
the eurozone economy although underlying inflation pressures are
still subdued, said Draghi at a speech in Madrid at Banco de
España. Eurozone PMIs released Tuesday showed economic activity has
remained at a six-year high.
But Draghi also said he doesn't see it necessary to change
course on its policy direction, which includes an overnight deposit
rate set at negative 0.4%. The ECB has said it could increase the
size or lengthen the duration of its asset-buying program if
inflation looks set to fall far back below its target of near but
just below 2%.
"[I]n in a multicountry monetary union such as the euro area,
made up of segmented national financial markets, asset purchases
are inevitably more difficult to calibrate, more complex to
implement, and more likely to produce side effects than other
instruments, including moderately negative rates," Draghi said.
"Negative rates may also have unwarranted side effects, but those
have so far remained limited."
After Draghi's speech, the euro was buying $1.1174, up from
$1.1184 late Tuesday in New York.
Stock movers: Daimler AG (DAI.XE) fell 1.6%, leading decliners
on the DAX, after German authorities raided the company's Stuttgart
headquarters
(http://www.marketwatch.com/story/daimler-offices-raided-in-diesel-emissions-probe-2017-05-23)and
other sites to secure evidence in their investigation in possible
diesel-emissions fraud by the car maker. Prosecutors said on
Tuesday the offices were raided.
Fiat Chrysler Automobiles NV (FCA.MI) (FCA.MI) fell 0.6%, with
the car maker late Tuesday saying it was "disappointed" the U.S.
Justice Department filed a complaint
(http://www.marketwatch.com/story/fiat-chrysler-chafes-against-claims-of-diesel-emissions-cheat-shares-fall-2017-05-23)
against the company related to allegations it used software to
cheat diesel-emission tests.
Kingfisher PLC shares (KGF.LN) slumped 7% after the parent of
home-improvement stores B&Q and Castorama said first-quarter
comparable sales fell 0.6%
(http://www.marketwatch.com/story/kingfisher-quarterly-same-store-sales-decline-2017-05-24)
on weak sales in France and disruption caused by a company
overhaul.
Shares of French aerospace supplier Safran SA (SAF.FR) and
Zodiac Aerospace (ZC.FR) each remained halted after Safran said it
cut its bid price
(http://www.marketwatch.com/story/safran-cuts-offer-for-zodiac-aerospace-by-15-2017-05-24)
for the plane cabin-interior specialist following Zodiac's profit
warning.
(END) Dow Jones Newswires
May 24, 2017 12:11 ET (16:11 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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