By Jasper Jolly
Live coverage as markets await European Central Bank announcement at 12:45pm BST
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11.29am BST
The FTSE 100 has been the strongest performer of large European indices so far on Thursday morning, down by 0.3%.
Stock markets in France, Germany and Italy are down by between 0.8% and 1% as we await the European Central Bank’s latest monetary policy decision at 12:45pm BST.
11.02am BST
The European Central Bank is widely expected to extend its huge quantitative easing programme as it tries to stimulate the economy.
We think today is the day in which the ECB needs to reinforce the perception of European authorities finally getting to grips with the scale of the Covid-19 hit with further QE action.
A failure to act today would imply consideration is being given to only running the program until September which would result in considerable anxiety amongst investorsthat would result in an immediatetightening of financial market conditions.
Despite the ECB only having spent a third of the €750bn [Pandemic Emergency Purchase Programme], anything less than a €500bn expansion will be a disappointment and could undo the recent weeks of market strength. Although equity markets seem to believe a V-shaped economic recovery is underway, the reality is that the euro area economy continues to struggle under the weight of the coronavirus crisis and the ECB cannot afford to delay additional stimulus.
It will be a very close call with the hawks potentially swaying a consensus-minded President Lagarde to defer the announcement, also to keep pressure on the politicians to deliver on the EU Commission’s €750bn Next Generation EU Fund.
ECB President Lagarde will be happy that someone is doing fiscal stimulus (as the pandemic is a problem for fiscal policy, not central bank policy). Today’s meeting should continue to emphasise the need for quantitative policy to support financial markets and ensure sufficient liquidity in the economy.
Close attention will also be paid to any hints that that last month’s German Constitutional Court ruling will tie the ECB’s hands in future, with the euro’s longest winning streak in six years at risk. A defiant tone, dispelling those concerns, would serve Lagarde – and the euro – well.
Source: Stock markets fall as investors hope for new €500bn ECB stimulus – business live
