Sunday, December 9, 2012

Eurozone Still in Financial Trouble

The European Central bank (ECB) cut its 2013 economic growth forecast for the Euro-zone, another grim foreshadowing for the 17-nation currency bloc in the year ahead.

The ECB downwardly revised its growth forecast to -0.3% from the 0.5% growth it initially estimated just three months ago.

According to Mario Draghi, a combination of improved financial market confidence and the central bank’s “accommodative” monetary policy would help generate recovery during the latter part of 2013, and added that they expected a growth of between 0.2% and 2.2% in 2014.

The revision was made after the EU’s statistics agency affirmed that the Euro-zone’s economy had contracted by 0.1% in Q3, and has failed to grow in any of the last four quarters.

Meanwhile, European equities gained ground on the back of unexpectedly strong factory-order data from Germany.

Stocks were likewise buoyed by news that the ECB held interest rates at a record low of 0.75% after ECB President Mario Draghi announced that they would continue to provide banks in the region all the liquidity required for refinancing operations at least until July 2013.

The FTSEurofirst300 index leapt 7.78 points to close at 1,131.85.

The euro traded sideways, declining slightly against the US dollar as currency traders awaited for the ECB’s rate announcement. The shared currency slipped 0.98 cents to close at US$1.297.