ECB press conference: Markets jump as Draghi hints at more QE - as it happened
Shares surge and euro slides as Mario Draghi marks his birthday by cutting the ECB's growth and inflation forecasts, and suggesting extra stimulus could be needed
- Summary: European markets show strong gains tonight
- Key points: ECB cuts forecasts as storm clouds gather
- ECB may extend QE soon
- Press conference highlights start here
5.30pm BST
Europe's stock markets have just shut for the day, with big gains across the board as investors anticipate more stimulus measure from the ECB.
The FTSE 100 closed up 110 points, or 1.8%, at 6194 - further away from the losses suffered a week ago.
Facing a deterioration in the external environment, the ECB nudged down its economic forecasts and opened the door for potentially increasing the scale of the QE programme. All-in-all, the changes to its macroeconomic forecasts were fairly marginal; but to put things into perspective, this is a first downgrade to the euro area's prospects since last December, so the changes may be small, but they are symbolically important......
As in March and in June, the ECB is on the record stating that it is prepared to ease policy if data does not meet expectations. At a time of heightened global uncertainty, even such a simple message is a good start.
4.48pm BST
Investec have sent over a handy explanation of the tweaks that the ECB is making to its asset purchase plan (announced early in today's press conference):
The change will see the Public Sector Purchase Programme issue share limit raised from 25% to 33%, except where the Eurosystem would have a blocking minority.
This change appears to be aimed at reinforcing views that the ECB maintained full control over its purchases and could work easily around market impediments; indeed Mr Draghi said it was meant to ensure the continued smooth functioning of the programme.
4.21pm BST
Ranko Berich, Head of Market Analysis at Monex Europe, reckons the European Central Bank will set sail on QE2 soon, following today's "unambiguously dovish" press conference:
"Draghi presented a double-whammy of pessimism, with additional downside risks from recent market volatility adding to the already downgraded growth and inflation forecasts."
Should we see the very real risks of free-falling commodity prices and a weakened growth outlook begin to weigh down on inflation prospects, Draghi has shown his intention to act by altering the duration, composition, or size of QE.
4.07pm BST
Enrique Diaz Alvarez, Chief Risk Officer and Currency Expert at Ebury, predicts that the euro will continue to weaken in the months ahead.
Here's why:
"The ECB is committed to easier monetary policy, and today's press conference has reaffirmed that this commitment explicitly includes a lower euro.
"While there were no changes to the ECB policy stance, President Draghi sent the Euro sharply lower right at the start of the press conference with comments and projections that were extremely dovish.
3.55pm BST
3.45pm BST
Mario Draghi's ability to move the markets without actually doing anything has left Marc Ostwald of ADM Investor Services shaking his head in admiration.
The sleight of hand in terms of a renewed dose of 'all talk and no action' was once again masterful, above all in emphasizing the ECB's dovishness and hefty easing bias.
3.41pm BST
ECB president Mario Draghi gave a clear signal that additional monetary easing is likely in the coming months, says Nick Kounis of ABN Amro.
Here's his early take:
The ECB lowered its 2017 inflation forecast as well as now seeing downside risks to these forecasts. At 1.7%, the new medium term forecast is already arguably below its price stability goal, while developments since that forecast was made, suggest it could be downgraded further.
We therefore now think that the ECB will like step up its QE programmes going forward. This will likely mean an increase in the monthly purchase amount as well as an expansion of the pool of eligible assets.
3.39pm BST
Wall Street has also welcomed Mario Draghi's pledge to take more stimulus measure if needed.
The Dow Jones industrial average, and the broader S&P 500, are both up by almost 1%.
S&P rips higher... +21 handles #ThankYouDraghi
3.23pm BST
We won't call it a vintage performance from Mario Draghi, as that might sound agist on his birthday.
Overall, we expect the economic recovery to continue, albeit at a somewhat weaker pace than earlier expected, reflecting in particular the slowdown in emerging market economies, which is weighing on global growth and foreign demand for euro area exports
[the governing council] emphasises its willingness and ability to act, if warranted, by using all the instruments available within its mandate and, in particular, recalls that the asset purchase programme provides sufficient flexibility in terms of adjusting the size, composition and duration of the programme.
We are observing a weakening of the prospects of the Chinese economy. This has two effects substantially: one is through the trade channel, weakening the economies of the rest of the world... and the confidence effect on the stock market and all the other financial markets, which is also operating on the negative side.
There will be some milestones that will be judged and assessed in the weeks ahead and based on that assessment the Governing Council will take a decision.
2.37pm BST
A slice of birthday cake for CNBC's Carolin Roth, who wishes Draghi a happy birthday.
Draghi press conference ends on 'happy birthday note' (just a wish not a song).
2.30pm BST
Francesco Papadia, a former senior official at the ECB, puts Draghi's last comments into context:
#Draghi indirectly criticises the current intergovermental approach to policy making in a-area and stresses the need of a federal approach.
2.29pm BST
Why are European countries struggle to achieve close integration?
These countries fought for centuries, Draghi replies. But after the second world war, they all recognised that integration was fundamentally a political process designed to guarantee permanent peace in Europe.
Draghi: Imperfection of our union is source of instabilities
Draghi mentions the war
2.24pm BST
There was no discussion about expanding QE today, Draghi insists. No-one on the governing council wanted to do it.
2.23pm BST
We didn't discuss whether interest rates have reached the 'lower bound', says Draghi.
They are currently at record lows, of course, with eurozone banks already paying negative interest rates on their deposits at the ECB.
#ECB's Draghi: Lower bound of interest rates not discussed. pic.twitter.com/zCkAABLomA
2.22pm BST
#Draghi is less comfortable with financial volatility now than he was in June: an incremental change.
2.21pm BST
Back to China. Draghi says the ECB "took note" of the devaluation of the yuan last month (I bet they did!).
He expects to hear more details at the G20 meeting of central bankers and finance chiefs this weekend.
2.20pm BST
Can the ECB do anything to address the refugee crisis that is unfolding in Europe?
Draghi replies that:
"Any European should be horrified by the tragic loss of life on our doorstep.
The ECB simply doesn't have any democratic mandate to act in this sphere so it's a question for our elected leaders, but this certainly shouldn't hamper our most heartfelt participation to what is happening."
2.14pm BST
Is the worst of the market turbulence over, or does the ECB expect more volatility?
Draghi says we must wait to see whether the last few weeks is short-term volatility, or permanent volatility. The latter would increase risk premia, and mean that today's forecasts on growth and inflation may be too optimistic.
Draghi: "Inflation expectations have been pretty volatile: they went down then went up". Could be EM, could be risk premium went up.
2.11pm BST
The ECB hasn't discussed how it could expand its QE programme, says Mario Draghi. We're not there yet.
2.09pm BST
The ECB has also cut the emergency support provided to Greece today, from a89.7bn to a89.1bn.
Don't worry, though. That's an encouraging sign, as it means there is more liquidity coming back into the banking sector.
Draghi has a go at journos for failing to get ELA number for Greece - corrected by his PR, story broken before ECB's announcement...
The ECB just got scooped by Bloomberg. Bravo @nchrysoloras #ELA
2.06pm BST
Onto Greece.
Draghi confirms that the ECB insisted that Greek bank depositors were protected from any haircuts on their savings.
2.03pm BST
Is the ECB chasing the wrong inflation target (close to, but below 2%)?
Draghi says the governing council hasn't discussed whether the target is still appropriate.
#Euro extends it's drop as #ECB's Draghi says exchange rate very important for GDP/inflation. pic.twitter.com/9gfEubmP37
1.58pm BST
This press conference is much less cheerful than the one in mid-July.
Does anyone still remember the upbeat, own-shoulder-clapping #ECB press conference of just a couple of months ago?
1.57pm BST
Mario Draghi then drops another big hint that the ECB could expand its bond-buying programme beyond September 2016.
Our new forecasts were drawn up on August 12, Draghi explains. That's shortly before China's Black Monday, which roiled stock markets worldwide.
1.54pm BST
European stock markets are surging, as traders anticipate further stimulus measures from the ECB:
Over at the Frankfurt stock market, the German DAX has jumped by 217 points, or over 2%. A weaker euro is very good news for German exporters.
European markets are RIPPING higher on Draghi comments: $DAX +2.3% $STOXX +1.9% $CAC +1.8% $FTSE +1.5% http://t.co/uVEWwnOMPf
1.50pm BST
Onto questions:
Q: What's the downside risk to the ECB's forecasts of 0.1% inflation rate this year? And what more can you do about it?
#Draghi: "we may see negative numbers of inflation in the coming months" but mainly due to energy. Repeats #ECB's willingness to act.
1.47pm BST
The euro has fallen by almost one cent against the US dollar during Mario Draghi's statement.
#Draghi speaks, the #euro sinks.... pic.twitter.com/58KvcKadWz
1.45pm BST
The ECB has lowered its forecasts for growth and inflation this year, and in 2016 and 2017.
That shows why Draghi is hinting at fresh stimulus measures:
Draghi: September macroeconomic projections foresee GDP increasing by 1.4% in 2015 [previous 1.5%], 1.7% in 2016 [1.9%], 1.8% in 2017 [2.0%]
Draghi: September macroeconomic projections foresee HICP inflation at 0.1% in 2015 [previous 0.3%], 1.1% in 2016 [1.5%], 1.7% in 2017 [1.8%]
1.44pm BST
Draghis also drops a clear hint that the ECB could expands its quantitative easing programme, given the new downside risks.
We will use all the tools in our mandate if needed, he insists.
Draghi: Asset purchases are intended to run until the end of September 2016, or beyond, if necessary
1.41pm BST
Analysts say Draghi has just announced a small, but significant, tweak to the ECB's QE programme
Share limited increased by #ECB's Draghi as downside risks appear to have pushed him to act
Little QE tweak, but QE tweak it is #Draghi #ECB
1.41pm BST
As expected, Draghi is sounding dovish.
He warns that 'renewed downside risks" have emerged to the outlook for growth, and inflation, in recent weeks.
1.37pm BST
Draghi is reading his prepared statement. He confirms that the ECB left interest rates unchanged.
Our asset purchase scheme (QE) continues to proceed smoothly, he continues.
Draghi: We decided to increase issue share limit in public sector purchase programme from 25% to 33%.
1.32pm BST
Here we go. Mario Draghi is entering the room, fashionably late as usual.
No sign of birthday cake crumbs on his suit, but he may be sporting a birthday haircut.
1.22pm BST
Mario Draghi's press conference is being streamed live, here:
1.18pm BST
15 minutes to go until the Draghi show. Time for another coffee!
1.17pm BST
Mario Draghi is a tricky man to predict, so traders who expect strong hints about more stimulus measures could be disappointed.
Brenda Kelly of London Capital Markets reckons Draghi will probably "keep his powder dry" until we get more clarity about the global economy, and learn whether the US raises interest rates this month.
President Draghi's dovishness could fall short of market expectations and surprise the looming ECB doves by pushing the euro higher against the US dollar and pound.
1.08pm BST
Here's the official announcement:
Monetary policy decisions: rates unchanged http://t.co/la0bFRvY8c
12.51pm BST
What better way to mark your 68th birthday than a press conference in Frankfurt?
Today is Mario #Draghi's birthday, he's turning 68. But please, no #confettis... :)
Remarkable scenes at today's ECB press conference: http://t.co/XB6i3QSCd4 pic.twitter.com/sCy08at1bq
12.46pm BST
To no-one's surprise, the European Central Bank has voted to leave interest rates unchanged.
That means:
12.40pm BST
Right, it's time to turn our attention to European Central Bank day.
New Democracy draws level with Syriza in poll for Mega TV http://t.co/OFNDOIRdvR #Greece pic.twitter.com/EOjlOwRrYe
12.22pm BST
Time for a recap, before the ECB's decision on monetary policy (12.45pm BST) followed by its press conference (1.30pm BST).
"Major equity markets climbed this morning thanks to a late rally in the US (in spite of mixed data) as well as a largely positive session in Asia overnight.
A two-day Chinese holiday is providing welcome regional respite from volatility linked to growth-concerns in the world's number 2 economy and of course its global knock-on effect.
Related: Receding Greek crisis helps boost eurozone growth
Related: UK service sector growth slows in August
11.40am BST
America has long been concerned that China has been keeping the yuan unfairly low, even before last month's surprise devaluations.
Treasury secretary Jack Lew has now fired a warning at Beijing to play fairly and let the yuan float more freely.
"They have to understand, and I make this point to them quite clearly, that there's an economic and a political reality to things like exchange rates.
They need to understand that they signal their intentions by the actions they take and the way they announce them. And they have to be very clear that they're continuing to move in a positive direction. We're going to hold them accountable."
10.51am BST
Wall Street is expected to join the rally in a few hours time:
10.19am BST
The Economist Intelligence Unit predicts that Mario Draghi will hint at further moves to ease monetary policy at this afternoon's press conference.
They reckon the ECB's bond-buying programme, due to end in September 2016, could be extended by almost another year. By then, though, European politicians must have implemented serious reforms.
(1/4) Draghi's first presser today since investors' China wobble. No policy moves expected, but the tone will be dovish.
(2/4) Our view. First, the ECB's programme of QE will run until mid-2017.
(3/4) Second, after taper and a pause, first ECB interest rate hike in Q2 2018.
(4/4) Third, euro zone in trouble if by that time monetary policy isn't firmly secondary to moves towards fundamental reform of the bloc.
9.56am BST
Despite today's rally, European markets are still sharply lower than one month ago - before fears over the global economy rattled investors.
9.38am BST
While Europe picks up pace, Britain's service sector growth has slowed to its slowest rate in 27 months.
The UK services PMI dipped to 55.6 in August, from 57.4, suggesting the recovery weakened last month.
UK PMI Services: 27-month low. Slowest rise in new business since Apr 2013. Input price inflation eases for 3rd straight month
9.29am BST
European investors are cheering the surge in eurozone private sector growth last month.
The FTSE 100 is now up by 103 points, or 1.7%, while Germany's DAX is 1.8% higher.
IHS believes that the Eurozone should be able to achieve reasonable, if unspectacular growth over the coming months - although the threat to global growth that could come from a marked Chinese slowdown clearly poses a downside risk.
9.19am BST
The increase in eurozone private sector growth means even less chance that the ECB will announce new stimulus measures today.
So argues Bloomberg economist Maxime Sbaihi, who predicts plenty of questions about China at this afternoon's press conference:
CHART: Euro-area #PMI at new 4y high in August. No summer break for the recovery -> No #ECB policy change today. pic.twitter.com/HHHbvvlw6U
It's #ECB day again and a different (external) world than last meeting (July 16). #Draghi will have more questions on China than #Greece...
9.11am BST
Despite the slowdown in France, the eurozone's private sector is growing at its fastest rate in four years.
Data firm Markit just released its Eurozone composite PMI, and it shows that output expanded more quickly in August.
"Although global economic worries have intensified in recent weeks, the calming of Grexit fears has led to an improvement in the business environment across the eurozone, pushing the pace of economic growth to its fastest for just over four years in August. The PMI is indicating euro area GDP growth close to 0.4% in the third quarter, a solid albeit unspectacular rate of expansion.
"The upturn was stronger than recorded by the flash reading, thanks mainly to stronger growth in Germany and the best performance for over four years in Italy, where the PMIs are both pointing to 0.5% GDP growth in the third quarter. But it is Spain that remains the star performer among the largest eurozone countries, with the PMI signalling another 1.0% GDP growth spurt in the third quarter.
In summary, Spain, Italy and Germany all beat expectations for Services PMI's. France slips back #euro
8.59am BST
Not for the first time (or the last, I fear), Germany's economy has outperformed France.
The German service sector PMI rose to 54.9 last month, from 53.8 in July, indicating faster growth.
8.55am BST
Less encouragingly, France's service sector came off the boil last month and only reported modest growth:
France Services PMI (Aug) falls back to 50.6, down from 51.8
8.52am BST
Now this is encouraging -- Italy's service sector just grew at the fastest pace since the early days of the financial crisis.
Service sector activity growth in #Italy fastest in almost five-and-a-half years in August. Headline index at 54.6 http://t.co/yuYYk2FmaU
8.42am BST
Sweden's central bank has resisted the temptation to cut borrowing costs to fresh record lows.
The Riksbank left benchmark interest rates unchanged at minus 0.35%, but did hint that it could do more, saying:
"The Riksbank remains highly prepared to make monetary policy even more expansionary in the event of inflation prospects deteriorating."
#Swedish Central Bank leaves rate unchanged,but cuts inflation outlook& says room more QE...almost exactly what expected from @ecb later
8.40am BST
Budget airline easyJet is leading the FTSE 100 risers in London.
Shares surged by almost 7%, after raising its profit forecasts and reporting record traffic levels in August.
8.36am BST
Up we go again! European stock markets have jumped at the start of trading, as investors pile into shares ahead of the ECB meeting.
The FTSE 100 leapt by 86 points, or nearly 1.5%, with traders anticipating that Mario Draghi may suggest new stimulus moves at this afternoon's press conference in Frankfurt.
8.31am BST
Spain's services companies have posted another month of solid growth, as its economy continues to recover.
The Spanish Services PMI came in at 59.6 in August, down very slightly on July's 59.7 but still a strong result (any reading over 50 shows growth). Measures of new business and job creation remained robust too.
8.20am BST
Overnight, the International Monetary Fund has warned that the downside risks to global growth have risen, partly due to the slowdown in China.
In a new report, ahead of the G20 finance ministers meeting in Ankara this weekend, the Fund said:
Near-term downside risks for emerging economies have increased, given the combination of China's growth transition, lower commodity prices, potential adverse corporate balance sheet and funding challenges related to a dollar appreciation, and capital flow reversals and disruptive asset price shifts.
Risks to growth include financial market volatility, declining commodity prices & depreciating EMs currencies. #G20 http://t.co/sHBUAx62c0
Related: IMF: China slowdown could keep global interest rates low
8.13am BST
Most mornings recently, we've been glued to the twists and turns on the Chinese stock market. Not today, though.
The Shanghai index is closed until Monday, so Beijing could hold a parade to mark its victory over Japan and the end of the second world war. And what an event it was, with masses of tanks, planes and troops on display.
For the Brits Ken Clarke has turned up. Didn't seem overly keen to have the official photo. pic.twitter.com/nyum4nUE1n
Related: China military parade commemorates second world war victory - as it happened
Xi, Putin aaaand Jiang Zemin out on balcony. Big gasp for last guy pic.twitter.com/V6Pcau9d8D
If you think you're melting imagine these guys... pic.twitter.com/33uUpcCkE1
Tanks rolling into Tiananmen pic.twitter.com/IokDotmPXx
7.54am BST
After some tough days, Asia's markets are staging a modest recovery today.
Japan's Nikkei jumped by 0.7%, following three days of losses, and there are also gains in South Korea and India.
In the face of poor growth prospects in Japan, banks aggressively began lending to emerging Asian nations. With the massive falls seen in emerging market currencies over the past twelve months or so, defaults on these loans have been soaring. This is likely to be a major headwind to the performance of the Nikkei over the coming months as well.
7.41am BST
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Investors will be looking to ECB President Draghi for more supportive comments later today.
Our European opening calls: $FTSE 6130 up 47 $DAX 10134 up 86 $CAC 4590 up 35 $IBEX 10027 up 89 $MIB 21765 up 153
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