What to watch

Investors expecting ECB to extend stimulus

When the European Central Bank meets Thursday, investors around the globe expect the bank to extend its stimulus program designed to jump-start economic growth and boost inflation. If they disappoint, markets won’t like it and will likely behave badly.

The ECB’s current stimulus program centers around an assetpurchase program where it buys assets, such as government bonds and corporate debt, at a clip of 80 billion euros per month. The current program is slated to end in March, but investors are counting on the ECB to extend the program, perhaps through September 2017. Many financial assets, especially eurozone stocks and bonds, are now priced with that result in mind.

“Given the continued weakness of inflation and heightened political and economic uncertainty (in Europe), ECB president Mario Draghi seems set to announce another six-month extension” of its asset-purchase program, Jennifer McKeown of investment research firm Capital Economics said in a report.

“Tapering ” of its asset purchases — or reducing the amount of euros it devotes to the program — will likely be put on hold after the Italian referendum Sunday that created fresh political uncertainty in Italy and focused a spotlight on its debt-laden banks.

If the ECB disappoints and announces “tapering,” or fails to extend its stimulus, the euro could lose further value vs. the dollar, but EU stocks could rise, as a weaker euro will help boost profits of eurozone exporters.