Ecb Announces Stimulus Plan

Ecb Announces Stimulus Plan

European stocks opened higher on Thursday before European Central Bank President Mario Draghi unveiled plans to launch quantitative easing as a means of stimulating the troubled eurozone economy.

Ecb Announces Stimulus Plan
Ecb Announces Stimulus Plan

After the announcement – 60 billion euros worth of asset purchases per month until September 2016, according to The Wall Street Journal – stocks rallied further.

The Stoxx Europe 600 was up close to 1% after the announcement. Germany’s DAX gained 0.6%, France’s CAC 40 rose 0.7% and the UK’s FTSE 100 added 0.5%. US stocks also opened higher, with the Dow and Nasdaq each adding roughly 1.5% and the S&P 500 increasing nearly 0.3%.

Investors anticipated Draghi would announce a significant asset purchasing program, MarketWatch stated. Eric Lascelles, chief economist at RBC Global Asset Management told MarketWatch, “Perhaps the way to view this most concretely is quantitative easing of some sort will be delivered, it should be quite large and quite welcome, as well.”

QE is a last ditch effort for the eurozone
The ECB’s huge decision to launch quantitative easing – and a big one, at that – is done with the hope that it will kickstart inflation and fight back the stagnation that has damaged Europe’s economies in recent years, according to The Wall Street Journal. Additionally, the ECB’s main interest rate remained unchanged at 0.05%.

The 60-billion-euro plan was a surprise to the upside for most investors and could be difficult to sustain, one investor expressed to MarketWatch.
“[S]ome further euro downside is likely, but sustaining this could be difficult, if we see national central banks shouldering the credit risk for such purchases,” explained Simon Smith of FxPro.

In the meantime, stocks in the eurozone have responded positively. Next up on Europe’s agenda is a snap election in Greece that might shake up the region further – but until then, investors are largely satisfied with the ECB’s decision.

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