Mario Draghi, the bank’s president, said yesterday that the board had made a decision to keep interest rates at the record low of 0%, the bank deposit rate at -0.4% and did not discuss expanding the €80bn per month bond-buying programme. The euro strengthened to $1.1274 from $1.1245.
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German industrial group Henkel issued two-year bonds worth 500 million euros on September 6 at a yield of minus 0.05 percent.
United States bond yields also hovered around their highs of the week, with the 10-year bond yield rising to 1.6210 per cent.
“So far we have just seen bank profits going down 20 per cent in the first quarter of 2015 and 2016 because of huge capital gains due to QE”.
Investors had expected the central bank to extend quantitative easing but in the subsequent press conference ECB President Mario Draghi said the central bank did not discuss an extension of its asset purchase plan.
President Draghi also stated that there had been no discussion of any extension to the bond-purchase programme with no additional stimulus needed at this time given that inflation forecasts had only been revised down slightly.
That evidence came from data on Thursday showing China’s imports rose unexpectedly in August for the first time in almost two years, suggesting domestic demand may be picking up. It is set for a 1.1 per cent rise this week.
Japan’s Nikkei.N225 lost 0.1 per cent, easing away from a three-month top in the face of a strengthening yen. It is poised to end the week 1.8 percent weaker.
Despite today’s decision to keep the QE purchase horizon unchanged, we believe the European Central Bank will extend purchases by six months, at the meeting in either October or December.
“But unless the Fed sends a message, it will be hard for them to make the markets price in a rate hike by the end of year”.
The focus will now shift to the US Federal Reserve when it holds a two-day policy meeting next week, as investors look for clues on the timing of a rate hike. Brent crude, used to price worldwide oils, lost 67 cents to $49.32 in London. U.S. Treasury yields also rose, with benchmark 10-year Treasury notes down 14/32 in price to yield 1.587 percent, from 1.539 percent late on Wednesday.
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Brent rose to as high as $US50.14 per barrel on Thursday. The company is the biggest consumer electrical and mobile phone retailer, and it gained 3.6 percent, hitting its highest point since Britain voted to leave the European Union and beating forecasts, to enjoy a four percent increase in its quarterly sales. Diamond Offshore Drilling gained 83 cents, or 5.2 percent, to $16.78. It retreated 0.9 percent to $47.21, but remained on track for a 6.3 percent advance for the week. The rise in bond yields undermined the potential for gold support and the dollar recovered some ground during the United States session. Spot gold was last at $1,335 an ounce, up 0.8 per cent this week, the biggest weekly gain in six weeks.
