What’s The Story Morning Glory?

by CC December 8, 2011 9:09 am • Commentary

FT

The European Central Bank has cut eurozone official interest rates for a second consecutive month in response to the region’s escalating debt crisis and darkening economic prospects.

The reduction in the ECB’s main policy rate, from 1.25 per cent to 1 per cent, was widely expected by financial markets and followed a cut of the same size in November, at the first governing council meeting chaired by Mario Draghi, president.

WSJ

So much for the ginormous market rally that seemed to be setting up after Mario Draghi announced some liquidity-pumping measures.

In response to a question during his press conference, Draghi just denied signaling that the ECB would embark on extra sovereign-debt purchases last week, which has taken stock futures by surprise.

This is disappointing those who were hoping for some promise that the ECB would back up the money truck and buy all the sovereign debt lying around, if only the EU would agree on a tighter union and jump through some other invisible hoops. That’s not happening.

Draghi also said the ECB didn’t consider a bigger rate cut than the rather thin 25-basis-point cut it delivered this morning and that even that decision was not unanimous — signaling there are plenty of hawks on the ECB who aren’t in a hurry to back up that money truck.

Piling on the disappointing comments, Draghi also poured cold water on the idea of the ECB lending to the IMF to lend to European governments, or whatever the goofy shell game idea du jour was.

Dow futures, up some 70 points earlier, are now down 65. S&P futures are down 10. Nasdaq futures are down about 13.

The euro is now selling off,  to $1.336. The 10-year Treasury note yield is down to 2.06%.

WSJ

Weekly jobless claims tumbled to 381,000 from 404,000 a week ago, a sight better than the 395,000 claims economists expected.

This is good news, the lowest level in claims since February. However, the Labor Department says the holiday season had some effect on claims, so we’ll have to see if these numbers hold up. And we’ll also have to see if lower claims translate into more jobs, or are just a sign that there’s nobody left to lay off.

Anyway, though, it’s good news for now.

Seeking Alpha

Thursday’s economic calendar:
7:00 BOE Rate Decision
7:45 ECB Rate Decision
8:30 Initial Jobless Claims
10:00 Wholesale Trade
10:30 EIA Natural Gas Inventory
12:00 PM Quarterly Flow of Funds Report
4:30 PM Money Supply
4:30 PM Fed Balance Sheet