US indexes back away from record highs in early trading

The ECB’s stimulus program, created to stoke inflation and boost economic growth, centers around an asset-purchase program where it buys investments, such as government bonds and corporate debt, in an effort to keep borrowing costs low.

European stocks advanced, led by banks as investors reacted positively to the European Central Bank’s decision to extend the length of its asset purchase programme longer than expected.

Ending the program as planned this coming March was not an option.

Political uncertainty: Draghi said here is a big uncertainty, much of which is political, going ahead given the fact that a number of euro zone economies will have elections in 2017.

Currently, it is buying 80 billion euro (£68 billion) per month through March.

The European Central Bank could announce several adjustments to the current asset purchasing programme today, keeping market focus firmly on the policy meeting now in session.

With the economic outlook in Europe still looking fragile and political uncertainty gripping world markets, analysts expect the European Central Bank will wind up its latest policy meeting with a pledge to continue its cash-pumping measures for another six months.

“At first sight, this would have seemed to be a hawkish move, but ECB President Draghi managed to package this decision with dovish commentary, by stressing that the ECB stands ready to increase or extend QE if needed and that tapering wasn’t discussed and is “not in sight”, said strategists at UBS.

A spokeswoman for the Central Bank in Dublin said on Thursday evening the institution “will manage the implementation of the purchase programmes carefully, so that the impact of the programme parameters or any changes in these parameters, would be as smooth as possible”.

Buying such negative-yielding bonds is “an option not a necessity”, Draghi said, that would make sure the European Central Bank does not run out of eligible bonds to buy. Germany sovereign bonds are in particularly short supply.

The ECB announced it is permitting the purchase of bonds yielding below the deposit rate of minus 0.4 per cent and reducing the minimum required maturity of bonds from two years to one. The Italian 10-year yield jumped 11 basis points to 2%. Few, if any, hold concerns about deflation. This would put the economy fully back on track.

Draghi stressed that the asset purchases could be expanded or extended if the economic outlook worsens in the future.

Italian prime minister Matteo Renzi resigned after voters rejected his proposed constitutional changes in a referendum on Sunday.

British bookmakers Ladbrokes Coral and William Hill fell 2.7 per cent and 6 per cent respectively after The Times reported a cross-party group of lawmakers would demand on Thursday stricter controls on betting machines. The ECB will continue with its program purchases until the end of 2017.

The International Monetary Fund welcomed the ECB’s latest stimulus efforts, with spokesman Gerry Rice saying in Washington that the IMF was encouraged by the bank’s “continued willingness” to use all available tools to drive up inflation. Economic stimulus under Donald Trump would push the Fed to raise interest rates faster.

The euro weakened vs. the dollar on the news.

Italy problem, no “tapering”: Draghi said the vulnerabilities in the regional banking sector and in Italy have been there for a long time, and they ought to be coped with.

Some in the eurozone remain critical of the European Central Bank.