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| ECB stimulus hint steadies markets | ECB stimulus hint steadies markets |
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| The European Central Bank brought respite to volatile financial markets after indicating it is ready to inject fresh stimulus into the eurozone as soon as March. | The European Central Bank brought respite to volatile financial markets after indicating it is ready to inject fresh stimulus into the eurozone as soon as March. |
| The ECB left interest rates on hold at its latest policy meeting but its president, Mario Draghi, acknowledged growing uncertainty about the economic outlook as he said the central bank would review its policy in March – sooner than many investors had been expecting. | The ECB left interest rates on hold at its latest policy meeting but its president, Mario Draghi, acknowledged growing uncertainty about the economic outlook as he said the central bank would review its policy in March – sooner than many investors had been expecting. |
| London’s bluechip FTSE 100 index rebounded from a three-year low on Draghi’s remarks, which followed assurances from his Bank of England counterpart, Mark Carney, this week that UK interest rates would stay at their record low amid turmoil on global markets and signs that the domestic economy had softened. | London’s bluechip FTSE 100 index rebounded from a three-year low on Draghi’s remarks, which followed assurances from his Bank of England counterpart, Mark Carney, this week that UK interest rates would stay at their record low amid turmoil on global markets and signs that the domestic economy had softened. |
| The FTSE 100 closed up 100 points, or 1.8%, at 5,773.8 but it is still down more than 7% from the start of the year having sold off with other leading bourses around the world on worries over global growth and China’s downturn. | The FTSE 100 closed up 100 points, or 1.8%, at 5,773.8 but it is still down more than 7% from the start of the year having sold off with other leading bourses around the world on worries over global growth and China’s downturn. |
| The pan-European FTSEurofirst 300 index closed up 2%. On Wall Street, the Dow Jones industrial average was up 1.2% and the S&P 500 was up 0.8% at the time of the London close. | The pan-European FTSEurofirst 300 index closed up 2%. On Wall Street, the Dow Jones industrial average was up 1.2% and the S&P 500 was up 0.8% at the time of the London close. |
| In December, the ECB expanded its quantitative easing programme - where the bank pumps money into the financial system by acquiring bonds – and trimmed a deposit rate paid on reserves held at the central bank. | In December, the ECB expanded its quantitative easing programme - where the bank pumps money into the financial system by acquiring bonds – and trimmed a deposit rate paid on reserves held at the central bank. |
| But the action was deemed too modest by market players at the time. Many had been expecting more aggressive moves following signals from Draghi that he was serious about lifting eurozone inflation out of the doldrums. | But the action was deemed too modest by market players at the time. Many had been expecting more aggressive moves following signals from Draghi that he was serious about lifting eurozone inflation out of the doldrums. |
| Referring to a tumultuous start to the year on global markets, which has seen trillions of dollars wiped off the value of world shares and a 40% drop in oil prices since the last ECB policy meeting, Draghi used a news conference on Thursday to defend December’s moves as entirely appropriate at the time. | Referring to a tumultuous start to the year on global markets, which has seen trillions of dollars wiped off the value of world shares and a 40% drop in oil prices since the last ECB policy meeting, Draghi used a news conference on Thursday to defend December’s moves as entirely appropriate at the time. |
| He told reporters: “As we start the new year, downside risks have increased again amid heightened uncertainty about emerging market economies’ growth prospects, volatility in financial and commodity markets and geopolitical risks.” | He told reporters: “As we start the new year, downside risks have increased again amid heightened uncertainty about emerging market economies’ growth prospects, volatility in financial and commodity markets and geopolitical risks.” |
| “It will therefore be necessary to review and possibly reconsider our monetary policy stance at our next meeting in early March.” | “It will therefore be necessary to review and possibly reconsider our monetary policy stance at our next meeting in early March.” |
| On currency markets, the euro weakened to a two-week low against the dollar on the prospect of more monetary policy easing from the ECB as soon as March. Draghi’s comments also moved oil prices: Brent crude was up more than 6% from the previous session at $29.60 per barrel. | On currency markets, the euro weakened to a two-week low against the dollar on the prospect of more monetary policy easing from the ECB as soon as March. Draghi’s comments also moved oil prices: Brent crude was up more than 6% from the previous session at $29.60 per barrel. |
| The price had fallen below $28 this week as worries about oversupply intensified on the prospect of fresh supply from Iran after the lifting of sanctions last week. Analysts cautioned that Draghi’s words had soothed markets for now, but they would need to be followed with real action. | The price had fallen below $28 this week as worries about oversupply intensified on the prospect of fresh supply from Iran after the lifting of sanctions last week. Analysts cautioned that Draghi’s words had soothed markets for now, but they would need to be followed with real action. |
| “ECB president Draghi once again saw the equity markets confirm his ‘super’ status as they jumped almost as soon as he started his speech,” said Alastair McCaig, analyst at online trading company IG. | “ECB president Draghi once again saw the equity markets confirm his ‘super’ status as they jumped almost as soon as he started his speech,” said Alastair McCaig, analyst at online trading company IG. |
| “All in all, it was very impressive, especially when you consider he didn’t actually promise anything, but he was convincing enough to get JPMorgan, RBS and Barclays to bring forward their calls for further easing from June to March.” | “All in all, it was very impressive, especially when you consider he didn’t actually promise anything, but he was convincing enough to get JPMorgan, RBS and Barclays to bring forward their calls for further easing from June to March.” |
| Ranko Berich, head of market analysis at the foreign exchange company Monex Europe, said any euphoria on the back of promises of central bank action may prove to be fleeting and that it remained unclear if the ECB was willing to commit to the sort of “massive, unconditional and open-ended QE programmes” seen from the Bank of Japan and the US Federal Reserve. | Ranko Berich, head of market analysis at the foreign exchange company Monex Europe, said any euphoria on the back of promises of central bank action may prove to be fleeting and that it remained unclear if the ECB was willing to commit to the sort of “massive, unconditional and open-ended QE programmes” seen from the Bank of Japan and the US Federal Reserve. |
| “As commodity prices fall and base effects from the euro fade, deflation will again threaten the eurozone and inflation expectations could begin to fall apart. If this is how 2016 plays out, vague promises will no longer be enough to keep the economy on track and the ECB will be forced to put its money where Draghi’s mouth is,” Berich said. | “As commodity prices fall and base effects from the euro fade, deflation will again threaten the eurozone and inflation expectations could begin to fall apart. If this is how 2016 plays out, vague promises will no longer be enough to keep the economy on track and the ECB will be forced to put its money where Draghi’s mouth is,” Berich said. |