Global equities retreat after ECB cuts rates; gold, oil fall

NEW YORK/LONDON: Global stocks were down and major Wall Street indexes fell on Thursday (Dec 12) after the European Central Bank cut interest rates for a fourth time this year, and gold prices slid from a five-week high.

European stocks finished lower in choppy trading after the European Central Bank cut interest rates and kept the door open to further easing in 2025 in the face of a struggling economy and heightened political risks.

The Swiss franc weakened after the Swiss National Bank cut rates by half a point, its largest reduction in nearly 10 years. Markets had priced a good chance of a half-point cut in the run-up to Thursday's meeting.

The US Labor Department's producer price index (PPI), which tracks the prices US companies get for their goods and services at the figurative factory door, jumped by 0.4 per cent, leap-frogging over the 0.2 per cent consensus and marking an acceleration from October's upwardly revised 0.3 per cent gain.

The US dollar rose.

Oil prices fell more than 1 per cent as a forecast for ample supply in the oil market offset optimism stemming from rising expectations of a US interest rate cut.

MSCI's gauge of stocks across the globe fell 2.35 points, or 0.27 per cent, to 869.04.

Wednesday's inflation reading showed the consumer price index (CPI) rose exactly in line with expectations in November, supporting bets for a Federal Reserve interest rate cut next week.

"The market has essentially seen one of the last remaining obstacles that could derail sentiment out of the way," said Chris Weston, head of research at Pepperstone. "Seeing the coast somewhat clearer for the illustrious seasonal chase of returns to play out into year-end".

Traders now place a 97 per cent chance on a quarter-point Fed cut on December 18.

The Dow Jones Industrial Average fell 211.90 points, or 0.48 per cent, to 43,937.10, the S&P 500 fell 25.05 points, or 0.41 per cent, to 6,059.25 and the Nasdaq Composite fell 95.97 points, or 0.48 per cent, to 19,938.97.

The pan-European STOXX 600 index closed down by 0.1 per cent, although rate-sensitive eurozone bank shares edged up 0.3 per cent.

Traders were pricing in 125 basis points worth of interest rate cuts by the ECB end of 2025, according to data compiled by LSEG.

"The ECB is on a direct path of consecutive quarter-point cuts until the deposit rate reaches 2 per cent. This market expectation is now being reinforced by even lower economic forecasts," said Jochen Stanzl, chief market analyst at CMC Markets.

Emerging stocks rose 0.38 per cent.The yield on benchmark US.

10-year notes rose 5.3 basis points to 4.324 per cent, from 4.271 per cent late on Wednesday.

CENTRAL BANK FOCUS

The dollar index, which measures the greenback against a basket of currencies including the yen and the euro,rose 0.29 per cent to 106.86, with the euro down 0.12 per cent at US$1.0481.

The greenback retreated against the yen after Reuters reported that BOJ policy makers were inclined to forgo a hike on December 19 and wait for more data on wages at the start of next year.

The Australian dollar turned lower against the dollar. Earlier, it surged on unexpectedly strong employment data, rebounding from Wednesday's weakness following a Reuters report that Beijing is considering allowing the yuan to depreciate further next year. China is Australia's top trading partner and the Aussie is often used as a liquid proxy for the yuan.

Although economists were almost unanimous in predicting Thursday's move by the ECB, many had acknowledged that a bigger cut would also be justified given a deteriorating growth outlook and rapidly retreating inflation.

In commodities, spot gold fell 1.22 per cent to US$2,684.83 an ounce as investors took profits and squared positions ahead of next week's Fed meeting. US gold futures settled 1.7 per cent lower at US$2,709.40.

Crude oil retreated after rallying this week on the threat of additional sanctions aimed at stifling Russian oil output.

US crude settled down 0.4 per cent to US$70.02 a barrel and Brent fell to US$73.41 per barrel, down 0.15 per cent on the day.