Good morning, and welcome to our live coverage of economics, business and markets in the UK, the eurozone and worldwide.
The European Central Bank has become the latest to unleash a massive wave of quantitative easing in a bid to sustain the eurozone economy – which like everywhere is under huge pressure from lockdowns trying to control the coronavirus pandemic.
The initial reaction of shock and awe to the announcement made late last night dissipated quickly, but European and UK stock market futures ahead of morning trading appear to show that markets could stabilise after a period of turmoil.
There are “no limits”, ECB president Christine Lagarde said on Twitter last night.
Christine Lagarde
(@Lagarde)Extraordinary times require extraordinary action. There are no limits to our commitment to the euro. We are determined to use the full potential of our tools, within our mandate. https://t.co/RhxuVYPeVR
The so-called Pandemic Emergency Purchase Programme (PEPP) will continue until the end of the year at least, and will be expanded to commercial paper, a debt instrument, from large companies outside the financial sector. It will also loosen rules on another programme designed to help companies get money, the additional credit claims programme.
The statement from the ECB’s governing council is, in central bank terms, extraordinary. It makes it clear that “self-imposed limits” could be abandoned – suggesting that this wave of quantitative easing could get bigger:
The Governing Council will do everything necessary within its mandate. The Governing Council is fully prepared to increase the size of its asset purchase programmes and adjust their composition, by as much as necessary and for as long as needed. It will explore all options and all contingencies to support the economy through this shock.
To the extent that some self-imposed limits might hamper action that the ECB is required to take in order to fulfil its mandate, the Governing Council will consider revising them to the extent necessary to make its action proportionate to the risks that we face. The ECB will not tolerate any risks to the smooth transmission of its monetary policy in all jurisdictions of the euro area.
Stock market indices struggled in the wake of the announcement, suggesting there is scepticism from investors as to whether it will be enough to counteract the economic effects of the outbreak. But in the context of previous moves of more than 5% either way the volatility was relatively muted.
In China the CSI 300 index, which tracks large stocks in Shanghai and Shenzhen, fell by 1.3%. The Shanghai Stock Exchange composite index lost 0.98%, while the Hang Seng index in Hong Kong lost 1.5%.
On the other hand, Japan’s broad-based Topix index gained 1%, but the blue-chip Nikkei 225 lost 1%.
The ASX 200 in Australia lost 3.4% – despite its central bank counterpart, the Reserve Bank of Australia – also cutting interest rates this morning in a bid to sustain the economy.
The agenda
- 9am GMT: Germany Ifo business climate index (no consensus estimates reported)
- 12:30pm GMT: US initial jobless claims (220,000 expected, up from 211,000 in the previous week)
