European stock markets got a big lift Thursday after the European Central Bank surprised traders by trimming its main interest rate to a record low of 0.05 percent from 0.15 percent. The euro, however, fell sharply following the news and could be on course to fall below $1.30 for the first time since July 2013.
KEEPING SCORE: After a lackluster morning session, the rate cut gave European markets a big lift. The CAC-40 in Paris was up 1.1 percent at 4,471 while Germany's DAX rose 0.4 percent to 9,662. And not directly involved, the FTSE 100 index of leading British shares was 0.3 percent higher at 6,891. Wall Street was poised for a solid opening too with both Dow futures and the broader S&P 500 futures up 0.2 percent.
RATE CUT: As well as cutting its main interest rate, the ECB also cut its deposit rate, what banks pay to keep their money at the central bank, to minus 0.2 percent from minus 0.1 percent. The negative rate is an effort to push banks to lend money by imposing a financial penalty for holding funds as super-safe deposits. Financial markets will be keeping a close watch on the upcoming press briefing from ECB President Mario Draghi. There are expectations that he may announce further measures, such as a Federal Reserve style monetary stimulus, to boost the ailing economy of the 18-country eurozone.
EURO IN FREEFALL: Europe's single currency, which has been in retreat over the past few weeks on expectations that the ECB may pursue further stimulus measures, fell 0.9 percent to $1.3022 following the rate cuts. The currency is trading at its lowest level since July 2013.
ANALYST TAKE: "The surprise decision by the European Central Bank to cut its main interest rates today looks like a stop-gap ahead of more powerful stimulus measures to be unveiled in the coming months," said Jonathan Loynes, chief European economist at Capital Economics. "At the margin, they may have some small positive effect on bank lending and activity and perhaps give the euro another downward nudge."
DATA DELUGE: The focus won't just be on Draghi though. Traders will also have one eye on a raft of U.S. data, including weekly jobless claims, ahead of Friday's official monthly nonfarm payrolls report. The payrolls report often sets the market tone for a week or two after their release.
UKRAINE: Amid all the economic developments, geopolitical issues remain. Russia and Ukraine said Wednesday they are working on a deal to halt months of fighting in eastern Ukraine, but Western leaders expressed skepticism, noting it wasn't the first attempt to end the deadly conflict.
ASIA'S DAY: Japan's Nikkei 225 fell 0.3 percent to 15,676.18 while South Korea's Kospi added 0.3 percent to 2,056.26. Hong Kong's Hang Seng inched down 0.1 percent to 25,297.92. Markets in Southeast Asia were mostly down, while China's Shanghai Composite Index rose 0.8 percent to 2,306.86.
ENERGY: Benchmark U.S. crude for October delivery was down 54 cents to $95 a barrel in electronic trading on the New York Mercantile Exchange.