Stock markets in Europe closed higher yesterday after the European Central Bank (ECB) made no changes to its bond-buying stimulus programme, leaving investors eyeing December for the next move.
The ECB stimulus scheme, known as quantitative easing (QE), involves the purchase of public and private bonds at the rate of €80bn per month, and is currently set to end in March 2017.
Investors were watching to see if ECB chief Mario Draghi would hint at an extension of the programme, or its winding down.
Draghi told a press conference in Frankfurt that the governing council “didn’t discuss tapering” the programme, dismissing a recent Bloomberg report that the bank was considering gradually easing its bond purchases which had rattled investors. But he added: “I would say an abrupt ending to bond purchases, I think it’s unlikely.”
“Draghi did not explicitly promise imminent policy action today (Thursday), but he signalled that asset purchases would not end abruptly,” said Jennifer McKeown, chief European economist at Capital Economics. “We expect the ECB to announce a six-month extension to its asset purchases at the current pace in December,” she said.
The bank also kept its benchmark “refi” refinancing rate unchanged at an all-time low of zero percent, with Draghi insisting that “low rates have worked” to make borrowing easier for households and businesses in the 19-nation euro area.
In the eurozone’s main markets, Frankfurt and Paris initially slipped as Draghi spoke but then rose closing up 0.52% and 0.44% respectively. London meanwhile finished the day little changed, up a mere 0.07%.
“We may have seen plenty of (market) volatility throughout the ECB press conference today but in reality, all Mario Draghi and the ECB actually did was confirm what most people already assumed,” said Craig Erlam, senior market analyst at OANDA.
He also stressed that investors would now be looking to December which “offers the luxury of the latest economic projections that will assist in deciding just how far to extend the QE programme and whether any additional, or less, stimulus is needed.”
Many analysts think more stimulus is needed as growth and inflation remain lacklustre in the eurozone.
Wall Street stocks were mixed amid diverging earnings reports with eBay plunging over its sales outlook for the key holiday quarter, while American Express rallied with better-than-expected third quarter results.
Around mid-day in New York, the Dow Jones Industrial Average rose 0.08% to18,217 points, while the broad-based S&P 500 and the tech-rich Nasdaq were slightly down.
Earlier yesterday markets had won some support from the previous day’s jump in world oil prices, while investors judged Hillary Clinton to have won the final presidential debate with Donald Trump.
Crude futures rallied on Wednesday on news of a heavy decline for commercial US oil inventories, fanning hopes about demand in the world’s top consumer, but the rally lost steam later yesterday.
The oil market has risen sharply since Opec last month agreed to cut output in a bid to address a global glut.
“The third and last US presidential debate overnight also looked to give stock market favourite Hillary Clinton a clear path to the White House next month.” said Lee Wild, head of equity strategy at stockbroker Interactive Investor.