European Shocker: ECB Lowers Rates

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The big macro can cause big moves in the market. What does today's headline macro news mean for your portfolio?

What's happening: In his first meeting as President of the European Central Bank, Mario Draghi got unanimous support to lower the benchmark interest rate by 0.25%. According to Bloomberg, 51 of the 55 economists it surveyed did not see a rate reduction in the cards.

In plain English, please: The move was precipitated by what Draghi described as "slow growth heading toward a mild recession." Like the Federal Reserve in the U.S., the ECB is responsible for maintaining price stability, but can also make monetary policy more accommodative to try to stimulate a faltering economy.

While the move is in the direction of stimulus, there are many who think it doesn't go nearly far enough. As Europe has grappled with its crippling debt crisis, there have been calls for the ECB to step in in a big way, acting as a lender of last resort that would backstop struggling countries and comfort private-market bond buyers.

Stocks to watch: U.S. investors were watching indexes rise through the first part of the day, and that was no doubt bolstered by the ECB's action. The Dow Jones Industrial Average (INDEX: ^DJI) was up more than 1.5% as of this writing. As far as individual stocks, major companies based in the European Union -- Telefonica (NYS: TEF) , ArcelorMittal (NYS: MT) , Vodafone (NYS: VOD) , and ABB (NYS: ABB) , for instance -- could stand to benefit if easier monetary policy does bolster the region's economy. But the fate of Europe is really a matter of global significance, so it's hard to say that any investors should overlook this news.

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At the time this article was published The Motley Fool owns shares of Telefonica. Motley Fool newsletter services have recommended buying shares of Vodafone Group and ABB. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.Fool contributor Matt Koppenheffer owns shares of ArcelorMittal, but does not have a financial interest in any of the other companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool or Facebook. The Fool's disclosure policy prefers dividends over a sharp stick in the eye.

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