The Toronto stock market was down slightly Thursday, as the European Central Bank announced it’s cutting its key interest rate and putting in place a new stimulus program to help rescue Europe’s weak economic recovery.
The S&P/TSX composite index slipped 7.11 points to 15,650.52. The Canadian dollar was ahead 0.38 of a cent to 92.22 cents (U.S.).
U.S. indexes also found support in the ECB announcement as the Dow Jones industrials gained 52.56 points to 17,130.84 while the Nasdaq jumped 25.39 points to 4,597.95. The S&P 500 index saw an uptick of 8.20 points to 2,008.92.
The European Central Bank trimmed its benchmark interest rate to a low of 0.05 per cent from a previous record low of 0.15 per cent. It also cut its growth forecast for 2014 to 0.9 per cent from 1.0 per cent previously and lowered its inflation forecast for the year to 0.6 per cent from 0.7 per cent.
ECB President Mario Draghi says the bank will start buying asset-backed securities and covered bonds in October.
The efforts are aiming to make credit cheaper as concerns continue to grow that the economy of the 18-country eurozone might go into reverse. It did not grow in the second quarter, raising fears of a triple-dip recession.
“The euro zone was moving in the right direction over the last few years, but starting this fall it’s going backwards a little bit, so something had to happen,” said Sadiq Adatia, chief investment officer at Sun Life Global Investments.
“This is another sign that the ECB will do something, whatever it takes the move the markets higher and get growth back into the economy.”
Although the timing may have been a surprise, the measures fall short of some expectations that an ECB stimulus program would have involved the purchase of government bonds, similar to what the U.S. Federal Reserve has done.
On Wednesday, the Bank of Canada kept its key rate unchanged at one per cent, where it has been since September 2010, and showed no indication that it will hike rates until next year.
In economic news, Statistics Canada reported a higher-than-anticipated trade surplus. The agency reported that Canada’s merchandise exports grew by 1.4 per cent in July, while imports edged down 0.3 per cent.
This raised the country’s trade surplus with the world to $2.6-billion from $1.8-billion in June. Economists had expected a surplus of about $1.2-billion, according to Thomson Reuters.
In the U.S, the Labor Department says slightly more Americans sought unemployment benefits last week, but the total number of people receiving jobless aid remains at its lowest level in more than seven years. Applications for jobless aid rose 4,000 to a seasonally adjusted 302,000. The four-week average, a less volatile measure, increased 3,000 to a still-low 299,750.
U.S. job figures for August will be released on Friday, as well as the latest Canadian jobs data.
On the corporate front, Manulife Financial Corp. announced after markets closed on Wednesday that it’s buying the Canadian operations of Standard Life for $4-billion in cash. Manulife said the acquisition will boost its presence in Quebec, which it has underserved in the past. Its shares dipped nearly two per cent, or 24 cents, to $21.95 (Canadian) on the Toronto Stock Exchange.
Meanwhile, in commodities, the December crude contract was down 56 cents to $94.98 (U.S.) a barrel, while December bullion fell $1 to $1,269.30 an ounce. December copper was jumped three cents to $3.14.
Adatia said investors are pulling back from gold and oil because the global economy, particularly the U.S. economy, is looking strong.
Fears over the conflict involving Russia and Ukraine have also lessened somewhat. On Wednesday, the two countries had said they were working on a deal to halt months of fighting in eastern Ukraine