Stocks fall as ECB slashes growth forecasts
U.S. stocks fell Thursday after the powerful European Central Bank (ECB) slashed its growth and inflation forecasts for this year and lowered estimates for the next two years, spooking risk-averse investors already worried about the health of the global economy. Prospects of a weakening economy tend to drive investors out of stocks and into safer securities like bonds.
The ECB also prepared new measures to stimulate the eurozone's economy.
Initially, U.S. stock futures were boosted when the ECB left interest rates unchanged at the conclusion of the central bank's latest policy meeting and pushed back the possibility of its first post-crisis rate hike to next year.
Equities usually react positively to such moves because it means borrowing costs will not rise, something that would otherwise weigh on profits and make stock investments less appealing. But it was the ECB's drastic cut in its three-year outlook for growth in the European Union that sparked widespread selling among American investors.
ECB President Mario Draghi said the eurozone economy will now expand only 1.1 percent this year, a drop of 0.6 percentage points from forecasts just three months ago.
In a move to help stimulate the economy, the ECB is offering banks a new round of cheap loans.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| I:DJI | DOW JONES AVERAGES | 38239.66 | +153.86 | +0.40% |
| SP500 | S&P 500 | 5099.96 | +51.54 | +1.02% |
| I:COMP | NASDAQ COMPOSITE INDEX | 15927.900321 | +316.14 | +2.03% |
“The persistence of uncertainties related to geopolitical factors, the threat of protectionism and vulnerabilities in emerging markets appears to be leaving marks on economic sentiment,” said Draghi. "The risks surrounding the euro area growth outlook are still tilted to the downside.”
The number of Americans filing applications for unemployment benefits unexpectedly fell last week by 3,000 to a seasonally adjusted 223,000, the government said Thursday.
In Europe, the major markets closed lower. London’s FTSE fell 0.7 percent, Germany’s DAX was off 0.7 percent and France’s CAC closed down 0.4 percent.
In Asia on Thursday, China’s Shanghai Composite added 0.1 percent, Hong Kong’s Hang Seng fell 0.9 percent, Japan’s Nikkei ended the day down 0.7 percent.
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This comes ahead of Friday’s big monthly jobs report. Economists expect 180,000 workers to have been added to payrolls in February, which would be down from the 304,000 added in January.
The unemployment rate may have slipped to 3.9 percent from the uptick in the prior month to 4 percent.
FOX Business' Ken Martin contributed to this report.