US open: Stocks fall following shock SNB decision to drop interest rate
Updated : 14:54
Markets were dropping on Thursday in response to the Swiss National Bank’s shock decision to abandon its currency ceiling against the euro and slash interest rates.
Early in the day the Dow Jones Industrial Average dropped 1.06% to 17,427.09, the S&P 500 decreased 0.58% to 2,011.27 and Nasdaq declined 0.49% to 4,145.84.
The Swiss National Bank called an end to its minimum exchange rate on Thursday, surprising the global market by lowering the interest rate to -0.75%.
Connor Campbell from Spreadex said: “The immediate reaction was explosive, as the EUR/CHF and the USD/CHF shed 25% of their value after 4 years of the SNB maintaining a minimum exchange rate.”
IG market analyst David Madden added: “ Inevitably the question of how this links to ECB QE is being raised - it might be too much to suggest the SNB know something we don't, but any significant move from the ECB would be bound to put pressure on
the SNB and its monetary policy, and today's move may be an attempt to fortify the SNB's position ahead of Draghi's appearance next week.”
Barclays Research also asserted: “f the current level of negative rates proves insufficient, we expect the SNB to cut further.
“We believe the SNB’s action will hasten central banks in other small, open economies in Europe – primarily the Scandinavian economies – to ease policy as well.”
Oil prices were rebounding slightly with WTI up 2.9% at $49.94 a barrel and Brent increasing 1.1% to $49.25 a barrel.
Over on COMEX, gold futures were advancing 1.72% to $1,255.70 while the dollar was sliding against the yen, and was advancing against the yen and the euro.
The yield on a benchmark US 10-year Treasury fell three basis points to 1.83%.
In the corporate world eHealth was plummeting 53.25% amid news the company expects to report a full-year adjusted loss of $0.13 to $0.04 for 2014. Meanwhile, EnteroMedics was rising 0.36% following its announcement that the Food and Drug Administration (FDA) has approved VBLOC vagal blocking therapy, delivered through the Maestro System for treating obese adult patients.