That the FTSE was the sole market in Europe to gain ground during another disappointing day’s trading yesterday is little cheer for investors.
The European Central Bank lowered its rates to its lowest-ever 0.75%. Despite this unprecedented floor, markets across Europe closed down. The CAC decreased 40 points, losing 1.2%, at 3228; Spain’s IBEX dropped below the 7000 mark once more, losing 214 points, 3%, taking it to 6954. Germany and Italy suffered a similar fate. Italy’s FTSE MIB shut 292 points down, 2%, at 14089, and the DAX was down 33 points, 0.5%, at 6532;
The FTSE’s gains should not be overestimated – an 8 point (0.1%) rise was all that prevented a clean sweep of downward pressure on Europe’s key indices.
Such a tepid day failed to be enhanced by the Bank of China’s rate cut, which analysts expect to boost mining performance over the coming weeks.
Nor even could another £50 billion worth of stimulus from the Bank of England provide any cheer. Indeed, the Bank’s actions seem to be increasingly ineffective at stimulating market confidence.
Mario Draghi, the ECB President, also attempted to lift investment and inter-bank lending by cutting the deposit rate from 0.25% to zero. This lowers the incentive for banks to sit on cash; thought to be a key factor in the ineffectiveness of Central Bank rate cuts of the last few years.
Mr. Draghi was quick to insist that we are “definitely not” at 2008 levels in terms of financial instability and market confidence.
That much can be gleaned from the absolute value of most of Europe’s core indices. The FTSE dropped below the 4000 mark during the crisis, and it currently stands at 5687 basis points. Despite this rise, it remains far below its peak – just short of 7000 points in late 1999, just before the dot.com bubble burst.
Little wonder then that many in the financial world are beginning to describe the ongoing economic struggles faced by the Eurozone and its immediate neighbours as a lost decade. It has been nearly 5 years since the financial crisis started, and we are still deeply mired in the losses accrued since.