ECB Projections to Show Future Growth Barely Above 1%

Cornelia Mascio
Settembre 11, 2019

Safe-haven assets have been caught up in the fixed income sell-off, with gold slipping to a one-month trough and Japan's yen plumbing a five-week low.

Dutch parliament on Wednesday sent a formal letter to the European Central Bank underlining its opposition to a policy under consideration that lawmakers think is contrary to Dutch interests.

"Speculation over whether the European Central Bank will enact a new QE programme tomorrow continues to ebb and flow".

"Given the chance that the ECB fails to match market expectations for easing policy, the balance of risks favours higher EUR/USD and European FX outperformance", ING forex strategists said in an overnight note.

Meanwhile Germany's Finance Minister Olaf Scholz said the country could counter a possible economic crisis by injecting "many, many billions of euros" into the economy, signalling his readiness for a big stimulus package if the economy tips into recession.

Europe's largest economy is teetering on the brink of recession, but strict national spending rules have tied policymakers hands on fiscal policy.

USA data on Wednesday showed that US producer prices unexpectedly rose in August and underlying producer prices rebounded, but that data will not change financial market expectations that the Federal Reserve will cut interest rates again next week to support a slowing economy.

With interest rates plumbing record lows in many countries and the effectiveness of further bond-buying muted by already record-low borrowing costs for governments, attention has turned to increased public spending or tax cuts to fire up growth.

Now, a new round of global rate cutting risks taking on a competitive edge as policymakers try to stay ahead of rising trade tensions, a volatile investment climate, and a shift in the political mood from shared support for globalization to a more zero-sum battle over a slower-growing world economy.

Asian bourses slipped lower after data showed China's mainland factory-gate prices shrank at their fastest pace in three years as flagging demand at home and overseas forced some businesses to slash prices.

The pan-European STOXX 600 index .STOXX rose 0.10%, while MSCI's gauge of stocks across the globe .MIWD00000PUS was flat after falling as much as 0.54% during the session.

"We really thought monetary policy had things under control", and would be able to offset whatever programs elected leaders chose to pursue, even a trade war, said Tara Sinclair, an economics professor at George Washington University.

"While the enormous slide in China factory gate prices reminded us of what we already know, U.S. tariffs are sinking the Chinese economy and at a much quicker pace than anyone could have imagined".

And climbing bond yields helped lift European banking stocks 1.8%, making financials the best performing sector on the continent. Sterling last traded at US$1.2353.

US crude traded at $57.97 a barrel after hitting the highest since July 31. Brent crude futures climbed to $63.23 a barrel.

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