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Japanese stocks fall as ECB fail to meet expectations

9 Dec

The European Union Summit is in full swing, and Mario Draghi has set some ground rules on how to move forward and avoid future debt build ups. Yet Japanese stocks have been left disappointed, as speculation of big bond-buying from Europe falls short…

Japanese stocks fell, and fingers of blame are pointing at the ECB for its apparent speculation of big bond-buying.

Nikkei 225’s Stock Average saw its biggest drop in two weeks, Sony Corp. lost 3.3percent and Mizuho Financial Group slid 1.9percent.

These are companies who are somewhat reliant on ECB bond buying, showing prime examples of how the problems in the eurozone are having a knock-on affect on the market.

Juichi Wako, a senior strategist at Nomura Holdings Inc. said: “The best scenario that the market had expected was for the ECB to decide to expand purchases of government bonds and then for the European Union to strengthen finance regulations.”

ECB expectations also disappointed ratings agency Standard and Poor’s, who saw their 500 index fall 2.1percent yesterday. They anticipated the ECB would expand its 207 billion-euro bond buying program.

Yet ECB president Mario Draghi said he was “surprised” markets thought the bank had been hinting at big bond buying.
In yesterdays speech, Mr Draghi put emphasis on a eurozone “fiscal compact” to restore bondholders confidence:

“What I believe our economic and monetary union needs is a new fiscal compact – a fundamental restatement of the fiscal rules together with the mutual fiscal commitments that euro area governments have made.”

The world is watching to see what happens at the final part of the European summit which is currently in motion. Leaders have already set some precautions to avoid such debt run ups in the future.

The plan includes the startup of a 500billion-euro rescue fund, on top of the 450billion already in place. Ultimately, Mr Draghi believes “the responsibility is with the leaders.”