LONDON (ShareCast) - - ECB President says economic recovery will begin in later 2013
- Spain surpasses targets at debt auction
- Thomas Cook (Xetra: A0MR3W - news) 's shares rocket as it narrows losses
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European equities fell for the most part Thursday after European Central Bank (ECB) President Mario Draghi said economic recovery would come later in the year.
Draghi said the Eurozone will heal as an absence of inflation risks allows the bank to maintain record-low interest rates.
"Later in 2013, economic activity should gradually recover, supported by our accommodative policy stance," Draghi said at a press conference in Frankfurt after the ECB met and left its benchmark rate at a record low of 0.75%.
He said inflation risks were contained, allowing the ECB's policy to remain accommodative to supporting growth in the economy.
However, he said he was concerned that the euro's advance could damp inflation pressures in the currency bloc and hinder the recovery.
"The exchange rate is not a policy target, but it is important for growth and price stability," Draghi said.
"We want to see if the appreciation is sustained, and if it alters our assessment of the risks to price stability."
The euro fell 0.90% to $1.3401 after Draghi addressed the media. It hit a 14-month high against the dollar this month and a three-year high against the yen.
Morgan Stanley (Xetra: 885836 - news) argued that a material euro overshoot could re-open the rate cut debate at the ECB.
"In this respect, the next set of the ECB staff projections due in March are key - notably the impact of the stronger euro on the inflation outlook," the analyst said.
Spain survives debt auction
Spain surpassed its targets as it placed €4.6bn in three government bonds in the sovereign market Thursday. It exceeded its initial aim to raise between €3.5-4.5bn despite concerns over the country's political instability.
The auction came amid corruption scandals in Spain's People's Party, sending the country's risk premium higher. Pressure is mounting on Spanish Prime Minister Mariano Rajoy to resign in the wake of allegations that he and other members of the party accepted secret payments.
Moments before the auction, the 10-year bond yield on the secondary market was at 5.50% in the secondary market, the highest since December.
Thursday's bond issues demanded higher yields than in the prior auction. The two-year bond called for a yield of 2.889% compared to 2.587%, the five-year yield was 4.569% compared to 3.808%, and the 16-year yield was 5.822%.
"All things considered, the Treasury will be pleased it managed to get all its debt out the door at an increasingly sensitive time for Spain," said Spiro Sovereign Strategy managing director Nicholas Spiro.
Meanwhile, global fixed-income manager Pacific Investment Management Company (PIMCO) insisted Spain request a bailout now in order to receive support from the ECB's Outright Monetary Transactions (OMT) programme.
"Spain's reluctance to come under the OMT umbrella may back fire as the country's situation is far from being resolved. Spain should apply for OMT support now - delaying entails too many risks," said PIMCO managing director Lorenzo Pagani in a report.
Thomas Cook soars on narrowed losses
Vodafone (LSE: VOD.L - news) fell 2.81%, ending a good start to the day, after the mobile-phone operator said that full-year adjusted operating profit would come in at the "upper half of the range of £11.1bn to £11.9bn".
Thomas Cook soared 18.53% after showing vast improvement as it narrowed its losses in the first quarter.
Burberry Group (LSE: BRBY.L - news) tumbled 6.29% as the luxury goods maker replaced its Chief Financial Officer Stacey Cartwright with Carol Fairweather.
Daimler (Xetra: 710000 - news) gained 5.22% after the maker of luxury vehicles forecast that group revenue and deliveries of Mercedes-Benz cars will increase this year.
Front month Brent crude futures edged higher, by 0.307 dollars to the 117.090 dollar level on the ICE.