Stocks edge up after US debate
European Central Bank (ECB) president Mario Draghi signalled the bank probably would not stop its quantitative easing programme without tapering it first, indicating that the stimulus was likely to run past the currently scheduled end-date of March next year.
“An abrupt ending to bond purchases, I think, is unlikely,” Draghi said yesterday. “We remain committed to preserving a very substantial degree of monetary accommodation.”
The comments keep the central bank on track for a potential extension of its bond buying programme as predicted by economists.
Not discussed
Draghi said the Governing Council did not discuss any extension or tapering of the programme in this policy meeting, while noting that the publication of fresh economic forecasts in December, as well as the results of internal studies on options to avoid running into bond shortages, would help the decision then.
The euro initially rose as much as 0.6 percent before giving up those gains.
Earlier yesterday, the 25-member council left its main refinancing rate unchanged at zero, the deposit rate at minus 0.4 percent, and reaffirmed that asset purchases would continue to run at the pace of €80 billion (R1 trillion) a month until March 2017 and in any case until policymakers saw a sustained pick-up in inflation toward its goal of just under 2 percent.
The ECB head said this month that he saw inflation in the euro area nearing the central bank’s target of just under 2 percent by late 2018 or early 2019. He had announced that ECB committees were reviewing options to allay concerns that quantitative easing would run out of bonds to buy.
Draghi said there was no “convincing upward trend” in underlying inflation, adding that “we want a convergence which is self sustained, without the extraordinary policy support in place now”.
‘We are committed to preserving a very substantial degree of monetary accommodation.’
The ECB’s current projections, which see inflation at 1.6 percent in 2018, are built on expectations of “additional monetary policy measures”, according to an account of last month’s council meeting.
“Information that has become available since the meeting in early September confirms a continued moderate, steady recovery and a gradual rise in inflation in line with previous expectations,” Draghi said, adding that risks to this baseline scenario remained to the “downside “.
Meanwhile, European equities extended falls yesterday.
The Stoxx Europe 600 index declined by 0.7 percent at 1.50pm in London, after trading little changed most of the morning. – Bloomberg STOCK markets inched higher, but the Mexican peso was mixed after the third and final US presidential debate, which was judged to have given no clear boost to Donald Trump’s hopes of winning the White House.
The peso is seen as the chief proxy for market pricing of the Republican candidate’s chances in view of his promises to impose tough limits on immigration.
It climbed to a six-week high against the dollar in the immediate aftermath of the debate but was down on the day in European trade.
A win for Democrat Hillary Clinton next month – now predicted clearly by polls – is also seen as opening the way for a rise in interest rates, which a number of US Federal Reserve policymakers have all but promised for December.
The peso lost 0.3 percent in early European trade to stand at 18.567 (about R13.8408) per dollar. Against a basket of currencies used to measure its broader strength, the dollar was up just under 0.1 percent, close to seven-month highs hit earlier this week.
“The likelihood of Donald Trump becoming president has nose-dived recently to as low as a one in eight probability… (and Wednesday) night’s debate has not provided that game-changing moment,” said Lee Hardman, a currency strategist with Bank of TokyoMitsubishi in London.
New York Fed president William Dudley overnight gave one of the clearest signals yet that the world’s largest economy is ready to take another step away from the ultra-low interest rates that have prevailed since the 2008 financial crash.
He said the Fed would move this year if the economy remained on track. Markets now price in a roughly 70 percent chance of a Fed hike in December. – Reuters