By Chuck Mikolajczak
NEW YORK (Reuters) – A gauge of global stock markets stumbled on Thursday while the U.S. dollar rose, as the European Central Bank postponed interest rate hikes to 2020 and launched a new round of cheap loans to banks in an effort to spark the euro zone economy.
Equities had drifted lower over the past several sessions before the session’s sharp drop, sparked by the ECB’s change of direction just months after it wound down its massive quantitative easing program.
The ECB’s move puts it in sync with other central banks around the world that have been taking a dovish tack, including the Bank of Canada earlier this week. The ECB also cut its growth and inflation estimates for 2019 as well as those for 2020 and 2021, raising alarm bells for investors once again over global growth.
“On the one hand, dovish talk could be bullish. On the other hand, maybe it is indicating just how slow things are over there,” said Chuck Carlson, chief executive officer at Horizon Investment Services in Hammond, Indiana.
“You wonder how long can the U.S. be the only horse dragging this global economy forward,” Carlson said. “The news on the ECB obviously points to, maybe you’re not going to get much help from Europe.”
The growth concerns weighed on banking shares in the United States, which helped push the benchmark S&P 500 index to its lowest close since Feb. 14.
The Dow Jones Industrial Average fell 200.23 points, or 0.78 percent, to 25,473.23, the S&P 500 lost 22.52 points, or 0.81 percent, to 2,748.93 and the Nasdaq Composite dropped 84.46 points, or 1.13 percent, to 7,421.46.
MSCI’s gauge of stocks across the globe shed 0.99 percent. MSCI’s index was below its 200-day moving average for the first time since mid-February and set for its fourth straight day of losses, the longest streak this year.
Stocks in Europe were whipsawed by the ECB action, falling from five-month highs and closing lower as European banks tumbled more than 3 percent.
The pan-European STOXX 600 index lost 0.43 percent.
The euro weakened to a low of 1.1204, its lowest since June 2017, and the dollar rose as high as 97.71 against a basket of major currencies.
The dollar index rose 0.85 percent, with the euro down 1.1 percent to $1.1181.
The global growth worries overshadowed generally solid economic data on the U.S. labor market and worker productivity. Non-farm payrolls data will be released on Friday.
The ECB move also sent prices on U.S. Treasury bonds higher, with 10-year yields hitting their lowest in a week at 2.636 percent.
Benchmark 10-year notes last rose 14/32 in price to yield 2.6429 percent, from 2.692 percent late on Wednesday.
Oil prices were higher as OPEC-led supply cuts and U.S. sanctions against exporters Venezuela and Iran although gains were limited by record U.S. crude output and demand growth worries.
U.S. crude settled up 0.78 percent at $56.66 per barrel and Brent was last at $66.30, up 0.47 percent on the day.
(GRAPHIC: Global assets in 2019 – http://tmsnrt.rs/2jvdmXl)
(GRAPHIC: Global currencies vs. dollar – http://tmsnrt.rs/2egbfVh)
(GRAPHIC: MSCI All Country Wolrd Index Market Cap – http://tmsnrt.rs/2EmTD6j)
(Additional reporting by Lewis Krauskopf; Editing by Bernadette Baum and Lisa Shumaker)