ECB halts QE bond-buying programme, and cuts growth forecasts - as it happened

European Central Bank warns that protectionism is hurting growth, as Mario Draghi addresses the press

• Latest: ECB cuts growth forecasts as threats mount
• eurozone QE on hold after almost four years

Earlier:

• Mike Ashley says November was worst in living memory
• Ashley says Debenhams may not survive without cash injection
• Italy caves in over its budget

5.05pm GMT

Finally, Britain's FTSE 100 has closed just 2 points lower at 6877.

Germany's Dax also closed flat, while Italy's FTSE MIB finished the day 0.5% higher, after Rome agreed to cut spending plans to satisfy the EU.

4.04pm GMT

Here's Patrice Gautry, Chief Economist at Union Bancaire Privi(C)e (UBP), on today's European Central Bank press conference:

"The ECB is looking at an increasingly risky environment and is forecasting sluggish growth (under 2%) in the coming years, along with persistently sub-2% inflation until 2021. However, it is winding up its quantitative easing programme, as previously announced. It came as no surprise that the ECB is relying on reinvestment inflows into fixed-income assets (with no end date scheduled) to continue to provide sufficient liquidity.

"Risk analysis is beginning to become less favourable but the sources of concern are believed to be temporary, or at least not enough of a concern to worry the ECB so much that it might have to review its scheduled interest-rate hike after Q3 if all goes well. The ECB is clearly not as relaxed as it would like to be, but it does not want to continue its asset-purchase programme, as it is also expecting regular rises in underlying prices and is setting out a tighter job market scenario and rising wages.

4.01pm GMT

Stewart Robertson, senior economist at Aviva Investors, says the EBC has concerns about the growth slowdown and fears inflation will return only very gradually.

"Once again, they had to revise down their growth projections for the Eurozone. GDP is now expected to increase by 1.7% in 2019. The downward revision is modest - just 0.1% - but it comes after a succession of earlier revisions in the same direction. Inflation is also projected lower - (1.6% from 1.7% in 2019).

ECB President Draghi remained as upbeat as he could and continued to insist that risks to the growth outlook were "balanced", despite acknowledging that recent data had been "somewhat weaker than expected".

3.11pm GMT

Time for a quick recap

Mario Draghi: "In some regions, QE has been the only driver of this recovery". Quite a statement.

The risks surrounding the euro area growth outlook can still be assessed as broadly balanced.

However, the balance of risk is moving to the downside owing to the persistence of uncertainties related to geopolitical factors, the threat of protectionism, vulnerabilities in emerging markets and financial market volatility.

"Months of hints, nods and winks meant the ECB had no choice but to turn off the Eurozone money taps or risk serious damage to its credibility.

"While Mario Draghi was boxed in by previous announcements about QE, his press conference revealed two stark truths - he remains deeply concerned at the fragility of Eurozone growth and reserves the right to administer further monetary stimulus.

2.33pm GMT

Last question.

Q: Last week in France, thousands of people took to the streets to express their anger. So how can central bankers provide answers to those people?

We blame and condemn violence, but the right to protest is part of our democracies.

I'm confident that the French government will address this problem in the best way.

2.26pm GMT

Asked about the 20th anniversary of the euro, Draghi says he would like to see "candid, close introspection that could inspire future action on completing the monetary union".

2.24pm GMT

Q: Is QE now a permanent part of your toolbox?

Yes, Draghi replies, adding that this brings the ECB into line with other major central banks.

Draghi: QE is part of our toolbox and can be considered to be useable by the Governing Council in contingencies. We've always considered this and it has now been sanctioned by the ECJ

2.22pm GMT

News about trade seems to be slightly better, says Draghi. But he won't give a list of improvement, because next time he'll have to list everything that's got worse...

He then cites "Brexit" and "other geopolitical events". They have increased general uncertainty, that affects confidence, and a decrease in confidence certainly hurts business investment, Draghi continues.

2.15pm GMT

Asked about eurozone banking union, Mario Draghi says we must be "alert and humble".

Alert because there is more to do:

Monetary union is not complete..... More needs to be done before we can declare victory and say banking union is complete.

2.13pm GMT

Mario Draghi is now explaining that the ECB is "monitoring carefully" whether the current record low interest rates are hurting bank profits.

2.09pm GMT

Q: The financial markets seem more worried about the downside risks than the ECB. Some don't expect an interest rate rise until 2020 - are they wrong?

Draghi argues that the markets "well understood our reaction function" -- meaning they helpfully ease financial conditions when growth weakens, helping growth to pick up again.

Nice reverse psychology from Draghi: markets price out ECB rate hikes, thereby easing financial conditions, in turn leading to growth to pick up, and then allowing the ECB to hike rates after all.

2.06pm GMT

Q: How effective has your QE bond-buying programme been over the last four years?

Smiling modestly, Draghi admits that he's "kind of biased" when it comes to QE -- a key part of his pledge to do "whatever it takes" to save the euro.

During some times....QE has been the only driver of this recovery.

2.01pm GMT

Sounds as if Draghi is ok with rate expectations as they are ... that's dovish, fwiw, but still a contradiction between consistent downgrades to GDP/CPI and 'steady as she goes' communication

2.01pm GMT

Q: Did any members want to set a time-limit on the re-investment of bonds purchased in the APP?

Our decision was unanimous, says Draghi (ie, no).

2.01pm GMT

Draghi says timing of interest rate increase not discussed in meeting. Looks to me as though a rate rise next year is becoming increasingly unlikely

1.58pm GMT

Q: You are ending QE four years after the US Federal Reserve, so are you concerned that you lack tools to fight the next downturn?

No, says Draghi, before immediately adding that the ECB is "always concerned". But it does have instruments to combat any downturn.

1.58pm GMT

Q: Did you discuss when you might start to raise interest rates?

1.56pm GMT

Draghi declines to define "extended time" (the timegap before it will start unwinding its QE purchases).

1.53pm GMT

The eurozone is facing "drivers of lower growth, but not low growth", Draghi tap dances.....

1.51pm GMT

Draghi is showing some fancy footwork...

Draghi: "The risks surrounding the euro area growth outlook can still be assessed as broadly balanced." But moving to the downside. Nice verbal fudge they did there.

1.50pm GMT

Draghi says disappointing growth this year no longer a one-off "there's a permanent component to this."

1.49pm GMT

Onto questions.

Q: What threats are the ECB governing council worried about in 2019?

It's been weaker for a while now.

1.46pm GMT

Mario Draghi is ending his statement by urging eurozone governments to crack on with structural reforms, and to rebuild their fiscal buffers.

He says this at every meeting, though, which implies that politicians aren't listening....

1.45pm GMT

Headline inflation is likely to decrease in coming months, Draghi adds, in another dovish signal...

Draghi: underlying inflation to remain muted, and inflation set to decrease over coming months

1.43pm GMT

Draghi sounds more like someone launching a stimulus programme, rather than one dropping anchor....

"Balance of risks [for the eurozone economy] is moving to the down side" - Mario Draghi

1.41pm GMT

Ouch! The ECB has lowered its forecasts for growth this year, and in 2019:

Draghi introduces the GDP and inflation outlook for the euro area pic.twitter.com/WwX68kvU41

1.40pm GMT

Slightly worryingly, Draghi is now outlining how there are signs of "slower growth momentum" ahead.

The balance of risks is "moving to the downside", he adds -- citing political uncertainty, protectionism, and financial market instability.

Draghi says the balance of risks is moving to the downside pic.twitter.com/mCh42nJkGT

1.37pm GMT

Draghi tells reporters that incoming economic data has been weaker than expected, due to softer external demand (perhaps due to the US-China trade dispute??)

However, the "underlying strength" of domestic demand is underpinning the eurozone's expansion, he says.

1.34pm GMT

President Mario Draghi begins by reading out today's statement, confirming that the ECB has left interest rates on hold (as expected) and halted buying new bonds under its asset purchase programme.

Draghi: We continue to expect the key ECB interest rates to remain at their present levels at least through the summer of 2019, and in any case for as long as necessary to ensure the continued sustained convergence of inflation to our aim over the medium term

Draghi: The net purchases under the asset purchase programme (APP) will end in December 2018. At the same time, we are enhancing our forward guidance on reinvestment.

Draghi: We intend to continue reinvesting, in full, the principal payments from maturing securities purchased under the APP for an extended period of time past the date when we start raising the key ECB interest rates, and in any case for as long as necessary

1.31pm GMT

Mario Draghi is holding a press conference now, to explain today's decision.

1.26pm GMT

The ECB is slamming the brakes on QE even though eurozone growth slowed to just 0.2% in the last quarter.

Christian Jaccarini, senior economist at Centre for Economics and Business Research, says investors are worried about the state of the euro economy....

With Eurozone stability remaining under threat from the slowing growth and heightened political unrest, the ECB's Governing Council was keen to remain supportive as it announced the end of quantitative easing today.

The move to end QE was almost inevitable given the ECB's credibility was at stake. Still, while clear statements on the prolonged use of reinvestments and low interest rates will provide some reassurances for investors, the backdrop for the announcements will remain concerning for many."

1.23pm GMT

Here's some early reaction to the ECB's decision to stop stimulating the eurozone economy by buying government bonds with newly-minted money:

End of an era... BREAKING! #ECB confirms it will halt its #QE program! pic.twitter.com/quUJ7ObG0r- jeroen blokland (@jsblokland) 13 december 2018

via 24liveblog https://t.co/7a8uEzdjoh

Same approach as the Fed, then. Start raising rates before unwinding QE. https://t.co/3WNvyaO2Ty

The ECB's policy decision doesn't read overly dovish. As expected the QE era in December, but there are no changes to the rates forward guidance, while (some kind of) commitment on reinvestment was already pre-announced a few months back. My guess: No move to downside risks.

12.57pm GMT

Newsflash: The European Central Bank has announced it is halting its asset-purchase stimulus scheme, despite signs that the eurozone is slowing.

The ECB has confirmed that it will stop buying government bonds at the end of this month, nearly four years after it announced the historic quantitative easing programme.

Here we go, a new forward guidance from @ecb pic.twitter.com/UieHMXFxMm

12.31pm GMT

Mike Ashley's gloomy warning has triggered a sell-off across the retail sector.

Marks & Spencer's shares have slumped by 4%, Next are down 3.3%, and Kingfisher (which owns DIY chain B&Q) are down 2%.

12.11pm GMT

Here's my colleague Angela Monaghan on Mike Ashley's Debenhams broadside:

Sports Direct boss Mike Ashley has launched an extraordinary attack on Debenham's after the department store chain refused his offer of a 40m cash injection despite "the worst November for retailers in living memory".

In a letter addressed to the Debenhams chief executive, Sergio Bucher, Ashley urged the board to reconsider the offer from Sports Direct, which is Debenhams' largest shareholder.

Related: Mike Ashley launches Debenhams broadside

12.11pm GMT

Debenham's has responded, saying that Sports Direct's offer of a 40m loan came with unacceptable strings attached.

In case you were wondering what Debenhams' response was to Mike Ashley...here it is... pic.twitter.com/gJdWYy8TcY

Remarkable letter from Mike Ashley to Debenhams CEO Sergio Bucher, offering 10% Debenhams equity in exchange for a 40m interest-free loan. Also hints at the (perhaps unsurprising) possibility of a refinancing in the works that would affect landlords and pensions in particular. https://t.co/9Aajl6iVVM

11.53am GMT

Mike Ashley isn't the only retailer warning that trading conditions are tough.

Clothing retailer Bonmarche hit investors with a profits warning this morning, and warned that:

The current trading conditions are unprecedented in our experience and are significantly worse even than during the recession of 2008 to 2009.

Related: Bonmarchi(C) warns of worse high street trade than 2008 recession

11.51am GMT

Here's retail expert Patrick O'Brien:

My favourite line in Mike Ashley's letter is "What we are offering is a very public statement of support for Debenhams," which appears in a very public statement of contempt for Debenhams.

11.46am GMT

Mike Ashley's blistering missive, urging Debenhams to take his money (on loan), has shaken up the retail sector.

Here's some early reaction:

Great get from Ashley Armstrong. Mike Ashley's incredible letter to Debenhams. Why won't you let me help you? I'm all you've got. Plus, of course, his own stake of 28% (worth 25m) would be worthless if Debenhams fails so Q is why doesn't he buy 100% and take it private? https://t.co/OSZA3R807T

Extraordinary letter from Mike Ashley to Debenhams' bosses in which he offers a bailout in the form of a 40m interest-free loan. Says chain has no credit insurance, key suppliers reining back, + trading worst ever. Basically, "I'm your only hope", is the message. https://t.co/iFWlezKIBq

11.34am GMT

Debenhams shares have fallen by 3%, following Mike Ashley's warning that the company may have "zero chance of survival" without taking financial help.

That takes them down to 5.5p, compared with 35p at the start of this year.

11.20am GMT

Mike Ashley is now laying into Debenhams on a conference call with analysts.

The call is to discuss Sports Direct's financial results (it reported a 27% drop in profits, due to the cost of rescuing House of Fraser earlier this year).

"They can save Debenham's and they won't and it's not my fault". At the @SportsDirectUK analyst briefing, Mike Ashley launches into spectacular and unprompted attack on Debs management team. Ashley says retailer is "going same way as Blacks". Blacks went into administration.

"It makes you want to blow your brains out!" Mike Ashley says his offer of help and a loan of 40 million to Debenhams was refused by management team. Sports Direct owns 30% stake in Debs. "I'm furious [Debenhams] is going to lose 150 million of Sports Direct's money".

11.13am GMT

Crumbs! Back in the UK, retail chief Mike Ashley has warned that last month was the worst November for shopping in living memory.

Ashley, the founder of Sports Direct, made the comments in an excoriating letter to the board of Debenhams, which has just emerged.

November was the worst November for retailers in living memory......

What we are offering is a very public statement of support at a critical time for the Debenhams business.

This is a copy of the letter Mike Ashley sent to a@Debenhamsa(C) yesterday proposing an interest free loan of 40 million in return for increased stake. Debenhams said no. "It's like being offered Messi on loan and turning it down" said Ashley. pic.twitter.com/hPy0SS0hck

10.49am GMT

Marcus Walker of the Wall Street Journal has a good take on the Italian budget.

He reckons Giuseppe Conte's compromise isn't enough to satisfy Brussels (which Pierre Moscovici confirmed this morning). So more spending cuts may be needed.

After much wrestling in Rome, PM Conte got Salvini & Di Maio to agree to 2.0% deficit (2.5% on EC's calculation). 0.4pp savings, a7bn, come partly from lower cost estimate of Lega's policy pro earlier retirement. /4

HOWEVER, 0.4pp is still a long way from reversing the 1.2pp widening of structural deficit acc. to EC.
EC was looking for a minimal structural tightening, eg 0.1pp, requiring total improvement of 1.3pp or a23bn. That's 3x more savings than Rome govt offering /5

EC willing to fudge the numbers, incl by using all possible flexibility in rules & changing estimate of output gap (which affects 'structural' deficit) given worsening growth outlook. But Bxl still looking for total improvement near 1pp of GDP. /6

That means Rome needs to find (durable, 'structural') cuts of at least another circa 0.5pp (a9bn) to achieve the compromise. Not clear how govt can do that. It's the entire cost of M5S's new "citizenship income." Di Maio already under pressure, can't give much. /7

Giving EU enough for a fudge cd test Salvini-Di Maio govt to the limit or beyond. If leads to snap elections, EU won't mind. A Salvini-led rightwing govt might be easier to deal with, because more coherent - EU establishment hopes.
Be careful what you wish for" /ends

10.36am GMT

Financial and economic experts are split over Italy's decision to cut its borrowing plans for 2019.

Barclays argues that the move is 'better late than never', telling clients that the coalition government in Rome has folded under pressure from the markets:

The Italian government has faced a steep learning curve since taking office in June this year. Both 5SM and the League have quickly realised the potential perils involved with Italy holding unreasonable fiscal policies and an anti-EU stance.

The experience of the past six months suggests the Italian government may be more mindful of the effects that anti-EU rhetoric can have, albeit it is unlikely that a populist coalition such as this will fully abandon such a stance. Importantly, the government's decision to revise its general government deficit target for 2019 could suggest a shift in the balance of power within the coalition.

Once again, markets reward Euro-area governments who cave in to European Commission pressure not to do what they promised their voters they would do. https://t.co/odrp3H20L5

9.55am GMT

Italy's budget u-turn means it must change two of its key pledges -- cutting the retirement age, and introducing a new basic income.

Reuters has the details:

Italy's government will cut "a few billion" euros from its two key reforms in order to hit the new deficit target it proposed to the European Commission, deputy industry minister Dario Galli said on Thursday.

The ruling coalition on Wednesday offered to lower its deficit target for next year to 2.04% of gross domestic product from a previous 2.4% to avoid disciplinary action from the EU.

Italy Deputy Industry Minister: Few Billion Euros Of Savings To Hit New Deficit Target Will Come From Revised Citizen Income And Pension Reform - RTRS

9.02am GMT

European commissioner Pierre Moscovici has told the French Senate that "constructive talks" are underway with Italy over its economy and deficit situation.

However, there is still work to be done, he added (via Reuters).

8.42am GMT

Over in Milan, Italian bank shares have jumped by over 3.2% in early trading.

That's another thumbs-up from the financial markets for the new, lower, deficit target.

8.30am GMT

Italian two-year bonds are also rallying hard today.

The yield on this shorter-dated debt has dropped to 0.468%, the lowest since May - when the current Italian government was being formed.

8.08am GMT

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

"We made a serious and reasonable offer".

Officials cautioned that there is more work to be done to satisfy EU regulations.

Newspaper La Stampa cited an EU "source" as saying that there is "still a gap to bridge, hopefully we can do it with the work that will continue in the coming days."

Related: Pound largely holds on to gains after May survives no-confidence vote

I'm told the PM celebrated last night with two glasses of red wine and some crisps. She's leaving for Brussels in a short while, and I understand is not expecting a major breakthrough at this summit, which is being described to me as "the beginning of the conversation"