Markets are going haywire after the ECB fires a 'bazooka'

The euro is ripping higher after a big drop that followed the European Central Bank’s announcement that it was cutting interest rates.

The euro had fallen about 1.5% to as low as 1.0823 against the dollar.

But the euro reversed its losses as Mario Draghi, the ECB president, said in a news conference that further rate cuts may not be necessary.

The euro crossed the 1.1200 level.

Before Thursday, Draghi said the bank would do whatever it took to bring inflation to its 2% target. Markets had therefore expected the rate cuts, and they took comfort in the fact that the central bank was working to mend the economy. European shares rallied alongside US stock futures.

“In one line: Mr. Draghi fires the bazooka,” Pantheon Macroeconomics’ Claus Vistesen wrote in a note after the rate-cut announcement.

Near 11:40 a.m. ET, the Dow was down 98 points, the S&P 500 was down 8 points, and the Nasdaq was down 26 points.

Futures had surged right after the interest-rate decision, but they pared gains after Draghi spoke about further cuts not being necessary.

Screen Shot 2016 03 10 at 9.35.31 AMInvesting.comThe Dow shortly after the open.

“The market appears to be saying that the drag to US growth from the stronger dollar is being offset by the stronger expected growth in Europe,” Neil Dutta, head of US economics at Renaissance Macro, wrote in a note. “This is seen as a positive global growth story.”

The central bank cut its deposit rate — charged to keep banks’ overnight deposits — to -0.40% from -0.30%, and it expanded its bond-buying program to €80 billion a month starting in April. The stimulus measures are intended to lower financing costs and boost spending.

Business Insider’s Will Martin has full details of the ECB’s decision here.

The ECB is the highlight of Thursday morning’s economic calendar, and its announcement comes after the Reserve Bank of New Zealand unexpectedly cut rates Wednesday, citing weaker global growth prospects. The New Zealand dollar got hit hard.

In US economic data, initial jobless claims were reported at a five-month low of 259,000 for last week.

Crude oil fell, with West Texas intermediate futures down 2% to about $37.50 a barrel. Reuters reported Thursday morning that a meeting between OPEC and non-OPEC members was unlikely to happen March 20 because Iran had not yet committed to a production freeze.

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