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Europe puzzled by ECB move
LONDON, England (CNN) -- European markets slipped into negative territory in mid-afternoon trading on Thursday after the European Central Bank failed to make a big move to help the economy. The ECB, which sets the interest rate for the 12-nation euro zone, cut the cost of borrowing by 0.25 percentage points to 2.50 percent in an attempt to revive the struggling $7 trillion economy. "It really smacks of a compromise, not daring to go for a 50 (basis point cut) but equally not to do anything right now obviously didn't seen appropriate." Adolf Rosenstock, economist at Nomura International, told Reuters. "I think the markets won't really be happy with the move because it shows a lack of courage and it shows the ECB council in an indecisive mood." (Full story) In choppy trading, London's FTSE 100 inched up 0.2 percent to 3,570.5 but the markets most affected by the ECB decision were all in the red. Frankfurt's Xetra Dax dipped 0.6 percent to 2,484.22, giving up on earlier gains, while the CAC 40 blue chip index in Paris slipped 0.1 percent to 2,651.57. Many economists had thought the latest economic data from Germany, the euro zone's biggest economy, would provide the ECB with a reason to cut interest rates by 0.5 percentage points. German unemployment adjusted for seasonal factors rose to 4.355 million in February, up from 4.288 million in January. (Full story) The pan-European FTSE Eurotop 300, a broader index of the region's largest stocks, was down 0.2 percent. Insurance stocks were among the biggest decliners across Europe. Swiss Life, the country's largest life insurer, slid 5.6 percent to 64.30 euros after it warned it expected a 2002 loss of about 1.7 billion Swiss francs, double analysts' forecasts. And Dutch insurer Aegon dropped 9.3 percent to 8.11 euros in Amsterdam after saying it would cut its dividend and decided not to provide a 2003 outlook. But British insurer Royal & Sun Alliance (RSA) rose 3 percent to 68.7 pence despite deciding to cut its dividend. (Full story) Investors may have seen the value of their portfolios decline sharply over the last three years but many have been able to rely on dividends to counter some losses. But falling stock markets have undermined the finances of insurance companies, forcing many to raise additional funds from shareholders. Vivendi Universal (PEX), Europe's biggest media company, fell 4.8 percent to 12.36 euros – after climbing more than 8 percent on Wednesday. The company's board meets later on Thursday to plot the future of the business amid reports interest from buyers for its U.S. film and music assets. The AEX index in Amsterdam fell 1.2 percent and Milan's MIB30 index declined 1.7 percent, while the SMI in Zurich was little changed. In the U.S. on Wednesday, stocks rose, ending a tumultuous session higher, despite the prolonged uneasiness about a potential war with Iraq. After the close of trade Thursday, investors will get a mid-quarter update from influential chipmaker Intel (INTC). The company is both a member of the 30 Dow industrials and a heavily weighted stock on the Nasdaq composite. As a result, what the company has to say about the health of its business and the long hoped-for pickup in technology spending will be closely scrutinized for implications for the rest of the industry. The Dow Jones industrial average rose 70.73 points to 7775.60, the S&P 500 index gained 7.86 to 829.85 and the Nasdaq composite crept up 6.63 points to 1314.40, all closed with modest gains. The major indexes had zig-zagged on both sides of unchanged throughout the session.
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