Stocks gain, dollar weakens after Fed signals possible rate cuts

NEW YORK -- A gauge of global stock markets strengthened on Wednesday, bolstered by gains on Wall Street, and benchmark US Treasury yields and the dollar dropped after the Federal Reserve signaled possible interest rate cuts over the rest of this year.

The US central bank held interest rates steady, as expected, but said it "will act as appropriate to sustain" the country's economic expansion as it approaches the 10-year mark and dropped a promise to be "patient" in adjusting rates.

The market expects the Fed could cut rates as soon as its next meeting, in July.

"I think it’s right in line with market expectations, puts a July cut in play,” said Brett Ewing, chief market strategist at First Franklin Financial Services in Tallahassee, Florida.

Nearly half of the Fed's policymakers now show a willingness to lower borrowing costs over the next six months.

Even policymakers who did not write down a forecast for a rate cut this year believe "that the case for somewhat more accommodative policy has strengthened," Fed Chairman Jerome Powell said in a news conference following the meeting.

Investors' hopes that the Fed would soon cut interest rates were fueled on Tuesday when European Central Bank President Mario Draghi hinted at economic stimulus, comments that drove up stocks and weakened yields.

"You have global central banks in a nearly orchestrated positioning, prepared to act if respective economies falter," said Quincy Krosby, chief market strategist at Prudential Financial in Newark, New Jersey. "Clearly the market is embracing it."

MSCI's gauge of stocks across the globe gained 0.70 percent. The index rose to its highest point in six weeks.

On Wall Street, the Dow Jones Industrial Average rose 38.46 points, or 0.15 percent, to 26,504, the S&P 500 gained 8.71 points, or 0.30 percent, to 2,926.46 and the Nasdaq Composite added 33.44 points, or 0.42 percent, to 7,987.32.

The pan-European STOXX 600 index ended little changed ahead of the Fed decision.

Investors will now turn attention to U.S.-China trade relations, with a meeting between U.S. President Donald Trump and his Chinese counterpart Xi Jinping set for next week's G20 meeting in Japan.

“You have the G20 summit coming up in a week and a half, said Eric Donovan, managing director, OTC FX-interest rates at INTL FCStone in New York. "It’s kind of ridiculous to think that the Fed was going to cut today."

Benchmark 10-year U.S. notes last rose 8/32 in price to yield 2.0302 percent, from 2.058 percent late on Tuesday.

The dollar index, which measures the greenback against a basket of currencies, fell 0.41 percent, with the euro up 0.31 percent to $1.1226.

US crude settled down 0.3 percent at $53.76 a barrel, and Brent settled at $61.82 a barrel, down 0.5 percent.

source: news.abs-cbn.com

Trump trade war worsens slowdown in global economy: analysts

WASHINGTON — President Donald Trump’s trade war is chilling business investment, confidence and trade flows across the world, a development that foreign leaders and business executives say is worsening a global economic slowdown that was already underway.

Recent softening in Europe, Australia and other parts of the world coincides with Trump’s intensified trade fight with China and other partners. Economists warn that further escalation by Trump — like tariffs on more Chinese goods or levies on foreign autos — could slow global growth to a crawl.

“With these trade tensions, the global economy, in a sense, is getting close to a crossroads,” said Ayhan Kose, the director of the World Bank’s Prospects Group.

Weakness in China, driven in part by fallout from the trade war, has spread to Germany, Australia and other nations, raising supply chain costs, chilling exports and worrying political and economic leaders.

On Tuesday, Mario Draghi, the president of the European Central Bank, said the bank was prepared to inject more stimulus into the eurozone economy to combat the economic slowdown.

The effects of Trump’s trade war have been particularly hard on Germany, Europe’s largest economy, which has been bracing for a decision about whether the United States will impose tariffs on auto imports. Trade anxiety has led to a decline in business sentiment and spending: Overall German industrial production contracted sharply in April, falling 1.9 percent on the month versus the 0.5 percent analysts expected.

“The risks that have been prominent throughout the past year, in particular geopolitical factors, the rising threat of protectionism and vulnerabilities in emerging markets, have not dissipated,” Draghi said in a speech Tuesday. “The prolongation of risks has weighed on exports and in particular on manufacturing.”

Trump lashed out at Draghi by name on Twitter, accusing him of trying to weaken Europe’s currency to get a leg up in global trade by making its goods cheaper to buy overseas.

“Mario Draghi just announced more stimulus could come, which immediately dropped the Euro against the Dollar, making it unfairly easier for them to compete against the USA,” Trump wrote on Twitter. “They have been getting away with this for years, along with China and others.”

The president’s aggressive approach to trading partners comes as developed and developing nations are already pulling back on the rapid globalization that dominated two decades of economic policymaking. Global flows of foreign direct investment fell by 13 percent last year, to their lowest level since the financial crisis, the United Nations Conference on Trade and Development reported last week.

It was the third consecutive annual decline, which officials blamed on multinational corporations bringing cash back to the United States after Trump’s 2017 tax overhaul. Officials warned that trade tensions posed a “downward risk” for a rebound in investment growth this year.

Trump has made steady use of tariffs to punish trading partners like China, Europe, Canada and Mexico that he says have destroyed American jobs by flooding the United States with cheap products and erecting unfair economic barriers at home. The president and his top officials insist that the trade war is lifting the US economy and that any slowdown in global growth is not related to the administration’s trade policies.

Treasury Secretary Steven Mnuchin said in an interview this month that he did not “think in any way that the slowdowns you’re seeing in parts of the world are a result of trade tensions at the moment.” He noted that growth in Asia and Europe had been tapering off before trade talks between the United States and China broke down in early May.

Trump has repeatedly cited China’s slowdown as proof that his trade war is working, telling reporters last week that the United States has “picked up $14 trillion in net worth of the United States.”

“And China has gone down probably by $20 trillion,” he continued. “There’s a tremendous gap.”

But a slowdown in the world’s second-largest economy — one that’s deeply enmeshed in global trade networks — affects other economies.

“China is the biggest trading nation in the world,” said Jacob Funk Kirkegaard, a senior fellow at the Peterson Institute for International Economics in Washington. “The idea that you could slow down the global growth engine and not affect other countries is just not credible.”

Multinational companies are already shifting supply chains and delaying capital spending in response to Trump’s tariffs on Chinese goods and foreign metals.

Tom Linebarger, chairman and chief executive of diesel engine manufacturer Cummins, said last week that his company had lost business for part of its operation in China as a result of the trade war. The Indiana company is changing its sourcing practices to minimize exposure to China, and Linebarger said its costs from tariffs now exceeded the benefits from the corporate tax cuts Trump signed in 2017.

“The tariffs that are in place now, and which may be in place for some time, are a significant burden on US businesses and farms,” Linebarger said.

Data increasingly suggest trade tensions are weighing on economic confidence, globally and in the United States.

A Federal Reserve Bank of New York manufacturing survey registered its worst drop ever on Monday, which many economists blamed on Trump’s threats this month to impose tariffs on Mexican imports as punishment for failing to curb unauthorized immigration. While those tariffs were averted, the chance that Trump could make a similar move against another trading partner has caught the attention of global companies and foreign leaders.

The trade war is having “a much bigger impact” on business hiring and investment in the United States than most analysts think, Deutsche Bank wrote in a research note on Monday. Several measures of policy uncertainty, compiled by economists Scott R. Baker of Northwestern University, Nicholas Bloom of Stanford University and Steven J. Davis of the University of Chicago, have spiked with the increased tensions.

On Tuesday, Trump said on Twitter that he had spoken by phone to President Xi Jinping of China and that the two leaders would have an “extended” meeting next week at the Group of 20 summit in Japan. Those comments could help calm global trade fears, which had risen after the United States accused China of breaking a trade deal last month and Trump raised tariffs on $200 billion worth of Chinese goods as punishment.

But no agreement is guaranteed, and Trump has threatened to impose tariffs on an additional $300 billion of Chinese goods if Xi does not agree to the original deal. The president has already placed import taxes on $250 billion worth of products from China and has hit trading partners with steel and aluminum tariffs and threatened tariffs on foreign autos from Europe and Japan.

The World Bank cut its forecast for global growth by 0.3 percentage points for this year in response to unexpected weakness in trade and manufacturing across advanced and developing economies. Global trade growth has slowed to its lowest rate since the 2008 financial crisis as exports from Europe and Japan have plummeted, particularly to China.

The bank noted that heightened policy uncertainty, including trade tensions, had been accompanied by slowing global investment and weakening confidence. It warned in a report this month that risks to its outlook were “firmly on the downside, in part reflecting the possibility of destabilizing policy developments, including a further escalation of trade tensions between major economies.”

International Monetary Fund economists estimate that if Trump follows through on his threat to broaden the Chinese trade spat, tariffs added this year alone will subtract 0.3 percent off global gross domestic product in 2020, with an additional 0.2 percent drag coming from tariffs the administration put in place last year.

Manufacturing, which is especially vulnerable to trade, is slowing across advanced economies even as service industries hold up. Factory gauges have dipped lower across Europe and are wavering in Japan. In the United States, the Institute for Supply Management’s factory index dropped to its lowest reading of Trump’s presidency in May.

Trade policies aren’t the only culprit behind slowing production. A continuing, structural slowdown in Chinese growth and tensions from Britain’s attempted exit from the European Union are among other factors.

China posted its weakest economic growth in 28 years in 2018, a pullback analysts blame partly on structural reforms and long-running trends and partly on the trade spat. Analysts at Moody’s Investors Service expect a further slowdown in 2019, to 6.2 percent from 6.6 percent, amid continued trade uncertainty.

Europe, where the IMF estimates 70 percent of exports are links in global supply chains, is particularly sensitive to trade disputes. And Germany highlights how the trade war between the United States and China can spill over.

The nation’s car industry is the backbone of its economy and is dependent on China for growth. As trade tensions exacerbate China’s economic weakening, manufacturers in Germany pay the price.

Volkswagen, the world’s largest carmaker, said last week that sales in China fell 7 percent from January through May, to about 1.2 million vehicles. Largely because of China, Volkswagen’s global sales fell 5 percent during the same period.

“We are experiencing the biggest decline in the world auto market in 20 years,” Ferdinand Dudenhöffer, a professor at the University of Duisburg-Essen, said in a report. If Trump follows through on threats to impose further tariffs on China, Dudenhöffer said, “there is danger of a global auto crisis.”

Germany’s central bank has slashed its forecast for growth this year to 0.6 percent from 1.6 percent. That bleak change was “mainly due to the downturn in industry, where lackluster export growth is taking a toll.”

“The fear factor, the uncertainty, is denting willingness to spend, willingness to invest,’’ said Carsten Brzeski, chief economist for Germany and Austria at ING in Frankfurt. “It’s therefore undermining growth in the eurozone.”

And in Australia, where an almost 28-year-old expansion is looking less secure and the central bank recently cut rates for the first time since 2016, economic officials are watching trade wars warily. The governor of the Reserve Bank of Australia, Philip Lowe, called international trade disputes “the main downside risk” in a recent news conference.

If coming trade negotiations don’t end in a resolution, the United States and its companies could also pay a price, leaders of the Business Roundtable, a corporate lobbying group in Washington, warned last week.

“The biggest self-inflicted risk to growth today would be trade going south,” said Jamie Dimon, chief executive at JPMorgan Chase.


2019 New York Times News Service

source: news.abs-cbn.com

Global stocks rally on G20 hopes, dovish ECB

NEW YORK -- Global stocks scored strong gains Tuesday on twin investor-friendly developments: upbeat comments from the US and China on trade ahead of the G20 Summit and an ECB statement hinting at an interest rate cut.

Hopes were raised that long-running trade talks between Washington and Beijing may yet yield an agreement after US President Donald Trump said he had a "good" conversation with China's Xi Jinping and would hold an "extended meeting" at the Group of 20 summit in Japan later this month.

Xi said the countries "will both gain by cooperating, and lose by fighting," according to a readout by Chinese state broadcaster CCTV. 

US stocks opened the session higher amid enthusiasm over dovish central bank statements, but Trump's comments on the G20 further lifted the market. All three major US indices climbed one percent or more.

Paris and Frankfurt each gained around 2 percent, boosted especially by ECB chief Mario Draghi, who promised further action if the economy fails to gain traction.

"Further cuts in policy interest rates and mitigating measures to contain any side effects remain part of our tools," Draghi told the ECB's annual economics gathering in Sintra, Portugal.

"Super Mario is back!" said IG analyst Chris Beauchamp in summary at the market action.

"Despite only having a few months left to his tenure, the head of the ECB has handed his successor a firmly dovish bias, as he leaves the door open to more QE (quantitative easing stimulus) and renewed negative rates at the ECB in order to try once again to kick-start the eurozone economy."

AWAITING THE FED

Draghi's comments came as the US Federal Reserve kicked off a two-day policy meeting. 

Although the Fed is not expected to cut interest rates on Wednesday, investors have been heartened by more dovish comments lately from central bankers and will be analyzing Fed Chair Jerome Powell's statements for clues on future steps, which they hope will signal a clear willingness to boost the economy.

Trump has repeatedly criticized the Fed and pressured Powell to cut rates, and on Tuesday lashed out at Draghi's statements, saying an ECB cut would "unfairly" harm US goods competing with a cheaper euro.

The dollar rose against the euro following the Draghi remarks, but retreated against the pound and yen. 

BK Asset Management's Kathy Lien said the dollar could fall if Powell's adopts a more dovish tone than at the May press conference, when he dismissed talk of easing. 

But if "Powell puts on a brave face, emphasizes the areas of strength in the US economy ... we could see a significant recovery in the greenback," she said. 

Among individual companies, embattled aerospace giant Boeing shot up 5.4 percent after it announced the sale of 200 of the 737 MAX planes to International Airlines Group.

The announcement at the Paris Air Show comes as Boeing's global fleet of 737 MAX planes remains grounded following two crashes that killed 346 people. Boeing has said it is making progress with regulators on having an upgraded plane recertified.

KEY FIGURES AROUND 2040 GMT (4:40 a.m. Wednesday in Manila)

New York - Dow: UP 1.4 percent at 26,465.54 (close)

New York - S&P 500: UP 1.0 percent at 2,917.75 (close)

New York - Nasdaq: UP 1.4 percent at 7,953.88 (close)

London - FTSE 100: UP 1.2 percent at 7,443.04 (close) 

Frankfurt - DAX 30: UP 2.0 percent at 12,331.75 (close)

Paris - CAC 40: UP 2.2 percent at 5,509.73 (close)

EURO STOXX 50: UP 2.1 percent at 3,452.89 (close)

Tokyo - Nikkei 225: DOWN 0.7 percent at 20,972.71 (close)

Hong Kong - Hang Seng: UP 1.0 percent at 27,498.77 (close)

Shanghai - Composite: UP 0.1 percent at 2,890.16 (close)

Euro/dollar: DOWN at $1.1202 from $1.1218 at 2100 GMT

Pound/dollar: UP at $1.2558 from $1.2534

Dollar/yen: DOWN at 108.43 yen from 108.54 yen

Brent North Sea: UP $1.20 at $62.14 per barrel

Oil - West Texas Intermediate: UP $1.97 at $53.90 per barrel

source: news.abs-cbn.com

Asia stocks pressured as Wall St hit by healthcare vote delay

TOKYO - Asian shares slumped on Wednesday after Wall Street was knocked hard in the wake of a delay to a US healthcare reform vote, while the euro rallied after European Central Bank President Mario Draghi hinted that the ECB could trim its stimulus this year.

MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.2 percent in early trading, while Japan's Nikkei share average also slipped 0.2 percent.

Philippine shares bucked the downtrend, with the main index up 0.13 percent to 7,886.44 in early trading.

On Tuesday, the benchmark S&P 500 posted its biggest one-day drop in about six weeks and closed at its lowest point since May 31, after the US Senate's move to delay voting on a healthcare reform bill rekindled worries on the timeline for President Donald Trump's business-friendly policies.

US stocks accelerated their losses after Senate Republican leader Mitch McConnell decided to put off a planned vote on a bill to dismantle the Affordable Care Act until after the Senate's July 4 recess, to get more time to garner sufficient votes for its passage.

Against the perceived safe-haven yen, the dollar slipped 0.3 percent to 112.120 after rising as high as 112.285 yen.

The dollar index, which gauges the US currency against a basket of six major counterparts, edged up 0.1 percent to 96.442 but was still well below its previous session high of 97.447.

The euro was up 0.4 percent at $1.1339. It notched a 10-month high of $1.1345 after Draghi, speaking to a conference in Portugal, said the ECB could adjust its policy tools as economic prospects improve in Europe.

Some strategists said that once the dust settled from the impact of his comments, the euro could give back some of its gains.

"These weren't very hawkish comments, as he suggested some changes to policy although the overall stance did not change," said Masafumi Yamamoto, chief forex strategist at Mizuho Securities in Tokyo.

"To me, it seems the change in policy will not be very substantial, so I think in the coming days, ECB officials will try to water down Draghi's comments," he said.

Crude oil futures dropped, giving back some of their overnight surge. Prices rose nearly 2 percent on the weaker dollar, short-covering and expectations that US crude inventories might decline for a third consecutive week.

Brent crude futures fell 0.6 percent to $46.35 per barrel. US crude futures were down 0.9 percent at $43.86. -- with ABS-CBN News

source: news.abs-cbn.com

Global Markets: Euro slips on Greece bailout, Italian vote concerns; stocks drift

SINGAPORE - The euro came under pressure on Tuesday after a media report that Greece may forego its next bailout payment if creditors cannot strike a debt relief deal, while Asian stocks were shackled by holidays in some regional markets and the United States and UK.

The common currency slid 0.2 percent to $1.1136 in its third session of declines after a German press report Athens may opt out of its next bailout payment.

Euro zone finance ministers failed to agree with the International Monetary Fund on Greek debt relief or to release new loans to Athens last week but did come close enough to aim to do both at their June meeting.

"The bailout payments are necessary to meet existing debt repayments due in July, so if Greece were to forgo this bailout payment the probability of a default would spike, reopening the discussion around a Grexit from the Euro-zone," said James Woods, global investment analyst at Rivkin in Sydney.

However, Woods cautioned against reading "too much into it" without more details or confirmation, adding that it is unlikely that Greece would opt out of the bailout payment at this stage.

A statement by European Central Bank President Mario Draghi reiterating the need for continued stimulus, and the prospect of early Italian elections also weighed on the euro.

MSCI's broadest index of Asia-Pacific shares outside Japan was flat early on Tuesday.

Japan's Nikkei slipped almost 0.1 percent.

China, Hong Kong and Taiwan markets are closed for holidays on Tuesday.

European blue-chip stocks fell 0.2 percent on Monday, with Italy's banking index sliding 3.4 percent, its biggest loss in nearly four months, after two lenders sought help to cover a capital shortfall.

Sterling retreated 0.2 percent to $1.281 after British Prime Minister Theresa May's lead over the opposition Labour Party dropped to 6 percentage points in the latest poll to show a tightening race since the Manchester bombing and a U-turn over social care plans.

The dollar inched back 0.1 percent to 111.15 yen in early trade.

The dollar index, which tracks the greenback against a basket of trade-weighted peers, advanced 0.2 percent.

In commodities, oil prices climbed in light trade but failed to make up last week's losses as concerns lingered about whether the extension of output cuts by OPEC and other producing countries will be enough to support prices.

US crude futures added 0.4 percent to $50 a barrel.

Gold was steady at $1,266.89 an ounce.

source: news.abs-cbn.com

Asia stocks meander ahead of Trump-Xi talks, US jobs data

SINGAPORE - Asian stocks drifted early on Friday after Wall Street and the dollar clocked tentative gains, with markets cautious over the talks between the US and Chinese presidents and US employment data later on Friday.

MSCI's broadest index of Asia-Pacific shares outside Japan was flat, headed for a 0.2 percent weekly increase.

Japan's Nikkei added 0.8 percent early on Friday after touching a four-month low on Thursday. It's set to post a 0.85 percent loss for the week.

The MSCI World index is down 0.4 percent for the week.

Overnight, Wall Street edged up between about 0.1 percent and 0.25 percent after data showed US unemployment benefit claims recorded their biggest drop in nearly two years.

The dollar added almost 0.1 percent to 110.90 yen early on Friday, extending Thursday's 0.1 percent gain.

The dollar index, which tracks the greenback against a basket of trade-weighted peers, was modestly higher at 100.72.

Despite five straight sessions without losses, it is up less than 0.4 percent for the week, amid nervousness about US non-farm payrolls data for March, due later in the session, with economists predicting job gains will be smaller than in February.

Traders are also looking with trepidation to Friday's meeting between US President Donald Trump and his Chinese counterpart Xi Jinping, who met face-to-face for the first time on Thursday for some social time and dinner at Trump's Mar-a-Lago resort in Palm Beach, Florida.

On Friday, they're set to tackle thorny issues including trade and security.

Markets' main concern is that Trump and Xi may not see eye-to-eye on most things and that traders will infer this from their body language, said Thierry Albert Wizman, global interest rates and currencies strategist, at Macquarie Group in New York.

"Rather than a lack of agreement, however, the greater risk is a lack of deep engagement," he said.

The euro was steady at $1.06435 in early trade on Friday, failing to recover any of Thursday's 0.2 percent loss following comments by the European Central Bank head that he sees no need to deviate from the ECB's stated policy path at least until the end of the year.

Mario Draghi also said record-low rates could remain until well after that to stimulate inflation.

The embattled South African rand steadied ahead of a vote of no confidence in President Jacob Zuma on April 18.

Three cabinet ministers removed by Zuma from their posts in a reshuffle last week quit as lawmakers of his African National Congress on Thursday.

The rand has slumped about 11 percent versus the dollar from a March 27 high. It was down about 0.2 percent on Friday, after a 0.35 percent gain on Thursday.

In commodities, oil prices were mixed, as analysts and investors remained cautious about record-high US crude inventories.

US crude was steady at $51.70 a barrel, retaining Thursday's 1 percent gain, and is set to end the week 2.2 percent higher.

source: news.abs-cbn.com

Dollar, bond yields up on strong US data; Wall Street dips

NEW YORK - The dollar and US Treasury yields gained on Thursday after a batch of solid economic data, while Wall Street indexes slipped as investors held back a day ahead of the inauguration of President-elect Donald Trump.

Oil futures rallied from one-week lows after the International Energy Agency said crude markets were tightening. The S&P 500's energy index, however, traded lower.

Benchmark 10-year US Treasury notes fell 23/32 in price to yield 2.47 percent, up from 2.39 percent late on Wednesday. The yields reached as high as 2.496 percent, the highest since Jan. 3, and have jumped from a low of 2.31 percent on Tuesday. Data showed US home-building rebounded in December and the number of Americans filing for unemployment benefits unexpectedly fell last week to a near 43-year low.

Investors were also reacting to comments by Federal Reserve Chief Janet Yellen a day ago signaling a path of steady interest rate increases, taken as a sign of economic strength.

But the data was not enough to embolden US equity investors, who were wary as they waited to see if Trump acts on pro-business promises such as tax cuts, fiscal stimulus and lighter regulation that had sent the S&P 500 up 5.8 percent since Nov. 8, one of the strongest transitions in history.

"There's been a lot of positive news priced into the market so it's taking a break on the equities side," said Wade Balliet, Chief Investment Strategist, Bank of the West, based in Denver who said investors are "getting nervous trying to piece together what the policies will be."

Investors shouldn't expect clarity from the inauguration speech but would hope for signals in coming weeks, Balliet said.

The S&P 500 sank 5.3 percent on outgoing President Barack Obama's inauguration day and fell 20.4 percent in the first 34 trading days of his administration, bottoming on March 9, 2009. But it has nearly tripled from that low, and including reinvested dividends has delivered a total return of nearly 295 percent.

The Dow Jones Industrial Average closed down 72.32 points, or 0.37 percent, to 19,732.4, the S&P 500 lost 8.2 points, or 0.36 percent, to 2,263.69 and the Nasdaq Composite fell 15.57 points, or 0.28 percent, to 5,540.08.

The dollar was up 0.2 percent against a basket of major currencies after paring gains. It had risen as much as 8 percent, boosted by the economic data and Yellen's comments. Yellen was due to speak again on Thursday evening.

Trading in European equities and the euro was choppy after ECB President Mario Draghi said interest rates would stay at current or lower levels for an extended period and the ECB would increase or extend bond purchases if the outlook worsens.

The euro clawed back losses against the dollar in choppy trade and was last up 0.25 percent after falling as much as 0.4 percent after Draghi's comments.

US crude settled up 0.6 percent to $51.37 per barrel, after shedding 2.67 percent on Wednesday. Brent crude finished up 0.5 percent at $54.16 after settling down 2.79 percent the day before.

Gold was up 0.1 percent after falling as much as 0.7 percent earlier in the day. It is on track for a 4.6 percent gain for the month as many investors have sought a safe haven.

source: news.abs-cbn.com

Asian shares flat but on track for weekly gains

TOKYO - Asian shares flatlined on Friday but were on track for robust weekly gains, while the euro caught its breath after sliding when the European Central Bank trimmed the size of its asset purchase program and also extended it for longer than many had expected.

MSCI's broadest index of Asia-Pacific shares outside Japan wobbled close to the previous session's close in early trading, poised for a weekly gain of 2.2 percent.

Japan's Nikkei stock index was up 0.6 percent, up 2.4 percent for the week in which the dollar gained 0.6 percent against the yen.

The dollar was up 0.1 percent at 114.18 yen.

The euro was licking its wounds at $1.0615. It had been as high $1.0875 before collapsing when markets realized the ECB's actions were actually very dovish.

The ECB said it would reduce its monthly asset buys to 60 billion euros ($63.68 billion) as of April, from the current 80 billion euros, and extend purchases to December from March - three months longer than what some analysts had forecast.

That dragged down two-year yields across Europe and sharply steepened the yield curve, a gift for banks that typically borrow short maturities and lend long.

The promise of lower rates for longer was taken as a green light for carry trades, where investors borrow euros at cheap rates to invest in higher yielding currencies.

"This effective and extended easing may make euro a funding currency of choice and so puts euro-crosses in focus," Westpac analyst Tim Riddell said in a note.

ECB President Mario Draghi said the unexpected move was not an outright winding-down of the central bank's quantitative easing (QE) program, and the central bank reserved the right to increase the size of purchases again if the eurozone economy falters.

The ECB's bond purchase changes came less than a week before the Federal Reserve's policy meeting next Tuesday and Wednesday.

Interest rates futures, implied traders saw a 98 percent chance the US central bank would raise interest rates by a quarter point next week, and about a 50 percent chance it would raise rates by at least another quarter point by June 2017, according to CME Group's FedWatch program.

Despite the impending rate hike, major US stock indexes climbed again on Thursday and set fresh record highs as Wall Street continued its month-long rally following the election of Donald Trump to president.

"We're at a point in time between big announcements from a couple of the big central banks after the ECB, and looking forward to fed next week, so the current momentum underway seems to be the path of least resistance at this point in time," said Bill Northey, chief investment officer of the private client group at US Bank in Helena, Montana.

"We've come a long way, and I wouldn't expect us to keep same pace, but the trajectory might be correct" for dollar strength, he said.

The dollar index, which tracks the greenback against a basket of six major rival currencies, was steady on the day at 101.12, up 0.3 percent for the week.

Oil rebounded on growing optimism that non-OPEC producers might agree to cut output following a cartel agreement to limit production.

US crude added 0.3 percent to $51.01 a barrel.

source: news.abs-cbn.com

Global markets: Asian shares firm, betting China won't disappoint

SYDNEY - Asian shares inched ahead on Wednesday after Wall Street got a lift from encouraging corporate earnings and investors wagered a coming barrage of Chinese data would confirm the economy had at least stabilized.

MSCI's broadest index of Asia-Pacific shares outside Japan added 0.2 percent, on top of a jump of 1.4 percent on Tuesday.

Australian shares firmed 0.3 percent, while Nikkei futures pointed to a steady start for the cash index Nikkei.

All eyes were on the Chinese gross domestic product (GDP) report due at 0200 GMT. While there are some doubts about the reliability of the data, markets tend to take them on face value.

The economy is forecast to have expanded by 6.7 percent in the year to September, underpinned by government stimulus and a hot property market.

Other data due is expected to show a slight pick-up in retail sales, industrial output and urban investment.

Figures out on Tuesday showed Chinese banks extended a surprisingly strong 1.22 trillion yuan ($181 billion) of new loans in September, capping a record nine-month lending spree.

Much of that growth has been driven by a booming housing market, that authorities are now trying to clamp down on without triggering a price collapse.

On Wall Street, the Dow ended Tuesday up 0.42 percent, while the S&P 500 added 0.62 percent and the Nasdaq 0.85 percent. The pan-European STOXX 600 index rose 1.5 percent to its highest level in nearly a week.

Of the 52 S&P 500 companies that have reported results to date for the third quarter, 81 percent had earnings that topped average analyst estimates, according to Thomson Reuters I/B/E/S.

One company seemingly disappointing investors was Intel , which slid 5.4 percent after the bell despite beating expectations on its earnings.

POUND UP AMID BREXIT CONFUSION

A report on US consumer prices showed underlying inflation moderated slightly in September to 2.2 percent, leading the market to slightly pare back bets on a December rate hike.

Fed fund futures imply around a 65 percent probability of a move, down from 70 percent.

Federal Reserve Chair Janet Yellen said last week the US central bank could allow inflation to run above its target.

US Treasury yields dipped, in line with their UK counterparts, amid confusion on whether parliament will have to ratify Britain's exit from the European Union.

British lawmakers are seen as less inclined to take a hard line on Brexit than Prime Minister Theresa May.

The news headlines caught the market very short of sterling and left the pound up at $1.2297, after a rally of 1 percent on Tuesday.

The dollar was steady on the yen at 103.85, after edging back from 104.20 the previous session. Against a basket of currencies it was steady at 97.861.

The euro remained vulnerable at $1.0977 ahead of Thursday's meeting of the European Central Bank where some investors wager President Mario Draghi will push back against talk of a tapering in its asset buying.

In commodity markets, oil prices extended gains as an industry group's data showed an unexpected draw in US crude inventories last week.

Brent crude was quoted around $52.10 a barrel, while US crude added 50 cents to $50.79.

source: www.abs-cbnnews.com

ECB hints at stimulus but keeps markets guessing

FRANKFURT - The European Central Bank held interest rates at record lows and kept the door open to more stimulus on Thursday but gave few hints about its next move, disappointing markets that had priced in a decisively dovish tone.

ECB President Mario Draghi said the ECB will study policy options to ensure it can pursue its unprecedented money-printing program but did not hint at the anticipated extension of its asset purchases, maintaining the March end-date in an unexpectedly balanced message.

Facing anemic growth and inflation, the ECB is buying 1.74 trillion euros worth of bonds, holding rates deep in negative territory and giving banks free loans, hoping to end the bloc's nearly decade-long economic malaise with an infusion of cheap credit.

It has managed to prop up growth, but not enough, and even shaved some of its forecasts on Thursday, reinforcing market expectations that more monetary stimulus is just a matter of time.

"For the time being, the changes (in forecasts) are not substantial (enough) to warrant a decision to act," Draghi told a news conference, adding that an extension of the ECB's asset buys was not discussed.

The euro zone's central bank kept its deposit rate at -0.4 percent, charging banks for parking cash overnight, and held the main refinancing rate, which determines the cost of credit in the economy, unchanged at 0.00 percent.

In the biggest clue about its next step, Draghi said the ECB had asked internal committees to look at various options to ensure the smooth running of asset buys. He had used similar language at the October 2015 meeting, which was followed by an easing package six weeks later.

This time the changes may be just technical but they are necessary preparatory work for any serious policy easing as the ECB is running out of assets to buy due to its self-imposed limits.

"This was a clear hint that the ECB will announce technical changes to its quantitative easing purchases at the October meeting, which is a prerequisite to any extension of QE beyond March 2017," ING economist Carsten Brzeski said.

Euro zone bond yields rose, the euro hit a two-week high and stocks extended losses after Draghi said the extension of asset buys was not discussed.

"The disappointment is clearly there in the market, but the ECB did keep the door open to more stimulus," said Kim Liu, senior fixed income strategist at ABN AMRO.

After 18 consecutive months of buying government bonds to pump up the economy and raise inflation, the ECB's holdings hit a landmark 1 trillion euros last week -- yet prices are seen rising a mere 0.2 percent this year, well below its target of just under 2 percent.

EASING STILL COMING
Draghi also took pains to reassure markets that he would not hesitate to ease policy if the inflation outlook warranted it.

"I would say there is no question about, as I think I've said at other times, the will to act, the capacity to act and the ability to do so," Draghi said. "If warranted, we will act by using all the instruments available within our mandate."

Prolonging the purchases is controversial because it risks further distorting market prices and even that the stock of eligible bonds will run out. The ECB has already had to stop purchases in Estonia and found no bonds to buy in Luxembourg last month.

That has led to increasing speculation that it will have to adapt the rules of its asset purchase program to provide even more stimulus, probably before year-end.

The choice is then between tweaking purchase rules or going for a bigger redesign although markets expect the bank to come up with a compromise.

"There was nothing in or between the lines which made us change our mind on what's coming: We expect the ECB to announce the extension of the asset purchase program by at least six months in December," Nordea said.

The easiest options could include buying bonds yielding less than the bank's -0.4 percent deposit rate, extending the maturity range of eligible bonds to 30 years from 20 years and buying an even bigger portion of certain bond issues.

Bigger changes could involve the purchase of new types of assets, such as bank bonds, non-performing loans, or in the extreme case, stocks.

Still, each of these changes would generate concern or even outright opposition from hawks and the growing camp of moderates on the Governing Council, who worry about the unintended negative effects of the ECB's extraordinary stimulus.

The ECB slightly upgraded its euro zone growth forecast to 1.7 percent from 1.6 percent this year, but downgraded it to 1.6 percent from 1.7 percent for both 2017 and 2018. Its forecast for a modest takeoff in inflation to 1.2 percent next year and 1.6 percent in 2018 were barely changed.

Draghi had his usual stern words for the structural reform efforts of the region's governments, saying they needed to be "substantially stepped up" to raise productivity, improve the business environment, and boost infrastructure.

"Fiscal policies should also support the economic recovery," he said, repeating a message given by central bankers at the annual Jackson Hole gathering this year but which has prompted little response so far in Europe.

source: www.abs-cbnnews.com

Asian shares, oil skid as global growth concerns dominate

TOKYO - Asian shares retreated and oil prices resumed their descent on Tuesday as investors took profits on rebounds over the last two days as fears of a global economic slowdown showed no sign of abating.

Japan's Nikkei fell 1.8 percent by midday while Hong Kong's Hang Seng Index fell 1.5 percent. Both fell more than 2 percent at one point.

MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.9 percent after two days of gains since late last week.

"Wherever you look - China, oil and the U.S., there is no clear evidence of improvement in economic fundamentals. So in the near term, it is hard to expect risk asset prices to gain further after a spate of short-covering," said Tatsushi Maeno, managing director at PineBridge Investments.

Crude oil prices have failed to extend their rebound that had started last week, falling around 7 percent so far this week. News that Iraq's output reached a record last month deepened concerns of oversupply.

Oil prices have fallen more than 75 percent from their 2012 peaks as global output was boosted by U.S. shale oil production and demand growth turned tepid, partially caused by the Chinese economy's slowing growth. The massive price fall is putting huge pressure on profitability of energy firms worldwide, which are in turn slashing investment and cutting jobs.

The U.S. S&P fell 1.6 percent to 1,877.08, led by a 4.5 percent drop in the energy sector.

Brent crude futures LCOc1, the global benchmark, dropped to $30 a barrel, falling 1.3 percent in Tuesday Asian trade, or 6.5 percent so far this week.

U.S. crude futures fell even more to $29.83 per barrel CLc1, down 7.4 percent from late last week.

Countering selling pressure for now are vague hopes that the U.S. Federal Reserve may tone done its bias towards further policy tightening and that the Bank of Japan may expand its stimulus. Both will hold policy reviews this week.

The U.S. Federal Reserve's policy statement is due on Wednesday followed by the Bank of Japan's announcement on Friday.

Fed officials have so far stuck to the line that the bank would be ready to raise interest rates four times this year despite market volatility as the U.S. economic expansion continues.

Investors have difficulty believing such a policy tightening is possible under the current unstable economic and market conditions, with federal fund rate futures pricing in just over one rate hike this year.

Some investors hope a more dovish tone out of the Fed would help to soothe market sentiment, given that the perception gap between markets and policymakers has been a major source of anxiety.

Speculation that the Bank of Japan could step up its stimulus this week is also rising, although many market players still think the BOJ will hold fire for now.

The rebound in oil and risk assets late last week was indeed spurred by comments from European Central Bank President Mario Draghi indicating another stimulus in March.

"The fall in markets is stemming from worries about China, oil and so on. And now people think policy makers will try to stop that with monetary easing," said Koichi Yoshikawa, executive director of finance at Standard Chartered Bank.

"The problem is that monetary easing has succeeded in supporting financial market but not necessarily the real economy," he added.

In the currencies, resurgent risk aversion helped to lift the yen to 118.18 to the dollar from its two-week low of 118.88 hit on Friday.

The euro also gained against the dollar to $1.0845, 0.5 percent above late last week and having recovered about half the losses seen on Thursday when European Central Bank President TOKYO - Asian shares retreated and oil prices resumed their descent on Tuesday as investors took profits on rebounds over the last two days as fears of a global economic slowdown showed no sign of abating.

Japan's Nikkei fell 1.8 percent by midday while Hong Kong's Hang Seng Index fell 1.5 percent. Both fell more than 2 percent at one point.

MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.9 percent after two days of gains since late last week.

"Wherever you look - China, oil and the U.S., there is no clear evidence of improvement in economic fundamentals. So in the near term, it is hard to expect risk asset prices to gain further after a spate of short-covering," said Tatsushi Maeno, managing director at PineBridge Investments.

Crude oil prices have failed to extend their rebound that had started last week, falling around 7 percent so far this week. News that Iraq's output reached a record last month deepened concerns of oversupply.

Oil prices have fallen more than 75 percent from their 2012 peaks as global output was boosted by U.S. shale oil production and demand growth turned tepid, partially caused by the Chinese economy's slowing growth. The massive price fall is putting huge pressure on profitability of energy firms worldwide, which are in turn slashing investment and cutting jobs.

The U.S. S&P fell 1.6 percent to 1,877.08, led by a 4.5 percent drop in the energy sector.

Brent crude futures LCOc1, the global benchmark, dropped to $30 a barrel, falling 1.3 percent in Tuesday Asian trade, or 6.5 percent so far this week.

U.S. crude futures fell even more to $29.83 per barrel CLc1, down 7.4 percent from late last week.

Countering selling pressure for now are vague hopes that the U.S. Federal Reserve may tone done its bias towards further policy tightening and that the Bank of Japan may expand its stimulus. Both will hold policy reviews this week.

The U.S. Federal Reserve's policy statement is due on Wednesday followed by the Bank of Japan's announcement on Friday.

Fed officials have so far stuck to the line that the bank would be ready to raise interest rates four times this year despite market volatility as the U.S. economic expansion continues.

Investors have difficulty believing such a policy tightening is possible under the current unstable economic and market conditions, with federal fund rate futures pricing in just over one rate hike this year.

Some investors hope a more dovish tone out of the Fed would help to soothe market sentiment, given that the perception gap between markets and policymakers has been a major source of anxiety.

Speculation that the Bank of Japan could step up its stimulus this week is also rising, although many market players still think the BOJ will hold fire for now.

The rebound in oil and risk assets late last week was indeed spurred by comments from European Central Bank President Mario Draghi indicating another stimulus in March.

"The fall in markets is stemming from worries about China, oil and so on. And now people think policy makers will try to stop that with monetary easing," said Koichi Yoshikawa, executive director of finance at Standard Chartered Bank.

"The problem is that monetary easing has succeeded in supporting financial market but not necessarily the real economy," he added.

In the currencies, resurgent risk aversion helped to lift the yen to 118.18 to the dollar from its two-week low of 118.88 hit on Friday.

The euro also gained against the dollar to $1.0845, 0.5 percent above late last week and having recovered about half the losses seen on Thursday when European Central Bank President Mario Draghi indicated more stimulus in March.

source: www.abs-cbnnews.comindicated more stimulus in March.

source: www.abs-cbnnews.com

Asia stocks skid as crude fails to sustain bounce

TOKYO - Asian shares and the dollar surrendered their gains on Thursday as recently volatile crude oil prices seesawed lower, although European shares were still expected to mark opening gains.

Financial spreadbetters predicted Britain's FTSE 100 to open up as much as 1.5 percent. Germany's DAX was seen rising by as much as 1.1 percent, and France's CAC 40 was seen advancing by as much as 1.2 percent.

S&P500 e-mini futures ESc1 were down about 0.6 percent in late Asian trade. On Wall Street overnight, an uptick in U.S. crude oil from 2003 lows helped major indexes pull away from losses of more than 3 percent, but they still finished more than 1 percent lower.

The European Central Bank will take center stage with its regular policy meeting later in the session. Central bank policymakers are expected to hold interest rates steady but highlight increasing risks to growth and inflation, while keeping the door open for further easing measures later this year.

"With last month's December disappointment still fresh in the memory, ECB President Mario Draghi will have to convince the markets that the ECB has a plan, and the ammunition to cope with the further slide in inflationary pressures that is likely to ripple across Europe in the coming weeks," said Michael Hewson, chief market analyst at CMC Markets in London.

Crude oil succumbed to added pressure on prices and its losses continued on Thursday.

The new front-month U.S. March oil futures contract CLc1 was down 0.7 percent at $28.15 a barrel, giving up an earlier rise. Brent crude LCOc1 dropped 0.6 percent to $27.72 in Asian trade.

MSCI's broadest index of Asia-Pacific shares outside Japan erased early solid gains and teetered in and out of negative territory in afternoon trade. It was last down 0.5 percent.

Japan's Nikkei average ended down 2.4 percent, adding to its 3.7 percent plunge in the previous session.

The Shanghai Composite Index slipped 0.9 percent, while China's bluechip CSI300 index was down 0.8 percent. It has lost around 15 percent since the beginning of the year.

David Dai, Shanghai-based investor director at Nanhai Fund Management Co, said fears of a prolonged bear market were, nevertheless, overdone.

"With stocks having fallen so much, much of the risk has been priced in and another free-fall is quite unlikely, although the chance of a sustainable rebound is slim," he said.

The dollar index, which tracks the U.S. unit against a basket of six counterparts, was down about 0.1 percent at 99.013.

The dollar turned back toward a one-year low against its perceived safe-haven Japanese counterpart on Wednesday.

The greenback shed about 0.1 percent to 116.75 yen after falling to 115.97 on Wednesday, undermined by U.S. data.

U.S. consumer prices unexpectedly fell in December, suggesting inflation was more sluggish than the U.S. Federal Reserve believed.

Other Wednesday data showed a drop in housing starts and building permits last month, which led investors to pare expectations of further interest rate hikes this year.

The euro edged up about 0.1 percent to $1.0893, ahead of the ECB meeting later in the session.

source: www.abs-cbnnews.com

Asian shares mixed as US jobs report looms, ECB soothes

SINGAPORE/TOKYO - Asian shares were mixed on Friday as caution about a U.S. jobs report jostled with signals from the European Central Bank that it is willing to take further steps to shore up the European economy.

MSCI's broadest index of Asia-Pacific shares outside Japan slipped 0.2 percent after rising in early trade. They've fallen 3.4 percent this week.

Japan's Nikkei fell 0.9 percent, extending losses this week to 6.0 percent.

Wall Street shares ended up on Thursday, though they pared back much of earlier gains.

The S&P 500 gained 0.1 percent but the Nasdaq Composite ended 0.4 percent lower.

"Markets sold off after the early bounce in accordance with the U.S. equity markets," said Nicholas Teo, analyst at online trading platform provider CMC Markets in Singapore. "Only one theme on every trader's mind today - U.S. jobs report tonight. And how that may possibly play on the Fed’s September rate decision."

A strong jobs number could cement optimism on the global economy and boost share prices but it could rekindle speculation of an early rate hike, which could hurt risk assets, particularly in emerging economies.

Economists polled by Reuters expect the U.S. economy to have produced 220,000 new non-farm jobs last month, continuing the robust employment creation of the past five years, while average hourly earnings are predicted to have risen by a modest 0.2 percent, as they did in July.

A drop in average prices charged by U.S. service businesses in August after 25 months of increases supports the case for a delay in rate hikes even though the overall service sector expanded at the fastest pace since May.

While the Fed has so far stuck to its script that interest rates will likely be raised this year, the ECB is tilting towards more easing.

It cut its growth and inflation forecasts on Thursday, warning of possible further trouble from China and paving the way for an expansion of its already massive 1 trillion-euro plus asset-buying program.

For the first time, ECB President Mario Draghi also said explicitly the bond-buying program may run beyond September 2016 and the bank may adjust its size and composition.

"It looked as if the ECB is preparing stimulus," said Masahiro Ichikawa, senior strategist at Mitsui Sumitomo Asset Management. "As it cut its growth projections and uncertainty over emerging economy is rising, it probably had to show that it is ready to take action."

That pushed down German 10-year yields, the benchmark for euro zone borrowing costs, to 0.725 percent, compared to a two-week high of 0.82 percent hit on Monday.

The euro also fell to a two-week low of $1.10875 and it last fetched $1.1128. Against the yen, the common currency hit three-month low of 133.135 yen.

In commodities markets, which have been battered by fears of a hard landing in China, trade remained highly volatile.

After gains in early trading, Brent crude futures slipped 0.5 percent to $50.44 per barrel.

Copper fell 0.8 percent to $5,203 per tonne after surging to $5,314 on Thursday, its highest in over three weeks, as bearish investors closed out positions ahead of U.S. job data.

Aluminum also shot up, touching a one-month peak on the London Metal Exchange on Thursday.

China's financial markets were closed on Friday for a national holiday.

source: www.abs-cbnnews.com

ECB launches 1 trillion euro rescue plan

FRANKFURT - The European Central Bank took the ultimate policy leap on Thursday, launching a government bond-buying programme which will pump hundreds of billions in new money into a sagging euro zone economy.

The ECB said it would purchase sovereign debt from this March until the end of September 2016, despite opposition from Germany's Bundesbank and concerns in Berlin that it could allow spendthrift countries to slacken economic reforms.

Together with existing schemes to buy private debt and funnel hundreds of billions of euros in cheap loans to banks, the new quantitative easing programme will release 60 billion euros ($68 billion) a month into the economy, ECB President Mario Draghi said.

By September next year, more than 1 trillion euros will have been created under quantitative easing, the ECB's last remaining major policy option for reviving economic growth and warding off deflation. The flood of money impressed markets: the euro fell more than two U.S. cents to $1.14108 on the announcement, and European shares hit seven-year highs.

"All eyes were on Mario Draghi and he has delivered a bigger bazooka than investors were expecting," said Mauro Vittorangeli, a fixed income specialist at Allianz Global Investors, adding that the news marked "an historic crossroads for European markets".

The ECB and the central banks of euro zone countries will buy up bonds in proportion to its "capital key", meaning more debt will be scooped up from the biggest economies such as Germany than from small member states such as Ireland.

The prospect of dramatic ECB action had already prompted the Swiss central bank to abandon its cap on the franc against the euro. Denmark cut its main policy interest rate on Thursday for the second time this week after the ECB announcement, aiming to defend the Danish crown's peg to the euro.

Draghi has had to balance the need for action to lift the euro zone economy out of its torpor against German concerns about risk-sharing and that it might be left to foot the bill.

WILL IT WORK?

Economists noted that Draghi had said only 20 percent of purchases would be the responsibility of the ECB. This means the bulk of any potential losses, should a euro zone government default on its debt, would fall on national central banks.

Critics say this casts doubt over the unity of the euro zone and its principle of solidarity, and countries with already high debts could find themselves in yet deeper water.

"It is counterproductive to shift the risks of monetary policy to the national central banks," said former ECB policymaker Athanasios Orphanides. "It does not promote a single monetary policy. This path towards Balkanisation of monetary policy would signal that the ECB is preparing for a break-up of the euro."

A German lawyer who has been prominent in attempts to halt euro zone bailouts said he was already preparing a legal complaint against the bond-buying programme.

Draghi said the ECB's Governing Council had been unanimous in agreeing that the step to print money was legally sound. There was a large majority on the need to trigger it now, "so large that we didn't need to take a vote".

"There was a consensus on risk-sharing set at 20 percent and 80 percent on a no-risk-sharing basis," he added.

One euro zone central banking source said five policymakers opposed the expanded asset-purchase plan: the central bank chiefs of Germany, the Netherlands, Austria and Estonia, along with Executive Board member Sabine Lautenschlaeger, a German.

Guntram Wolff, head of the Bruegel think tank, said the plan's size was impressive. "But the ECB has given the signal ... that its monetary policy is not a single one. That's a bad signal to markets and a bad signal to everybody in the euro zone."

The ECB is trying to push euro zone annual inflation back up to its target of just below two percent; consumer prices fell last month, raising fears of a Japanese-style deflationary spiral. But there are doubts, and not only in Germany, over whether printing fresh money will work.

Most euro zone government bond yields are at ultra-low levels and the euro had already dropped sharply against the dollar. Lower borrowing costs and a weaker currency could both help to boost economic growth but there is a question about how much further either can fall.

The ECB could create the basis for growth, Draghi said, but he put the onus on governments to follow. "For growth to pick up ... you need structural reforms," he said. "It's now up to the governments to implement these structural reforms. The more they do, the more effective will be our monetary policy."

Draghi was echoing the view of German Chancellor Angela Merkel, who said: "Regardless of what the ECB does, it should not obscure the fact that the real growth impulses must come from conditions set by the politicians."

The ECB has already cut interest rates to record lows and left its refinancing rate, which determines the cost of euro zone credit, at 0.05 percent.

Greece and Cyprus, which remain under EU/IMF bailout programmes, will be eligible for the ECB programme but subject to stricter conditions.

In practice, Greek debt does not currently qualify as another rule stipulates that a maximum 33 percent of the bonds issued by any country may be bought. The ECB and other euro zone central banks already own more than this, although they may start purchases once enough of their Greek bonds have matured to take the total below the 33 percent threshold.

Greece votes on Sunday in an election where anti-bailout opposition party Syriza is on track to emerge as the biggest party in parliament.

source: www.abs-cbnnews.com