Markets await hints on more European Central Bank stimulus

Worries that the world can’t rely any more on China for strong growth and falling oil prices have rattled investors and sent global stocks lower.

The European Central Bank meets later Thursday after subdued inflation across the eurozone caused the bank in December to cut its deposit rate deeper into negative territory and extend the duration of its asset-purchase program.

Betting among analysts is that the bank won’t add stimulus until at least the next meeting in March. That slide helped keep the eurozone annual inflation rate down to a bare 0.2 percent in December – far below the bank’s goal of just under 2 percent.

US stock index futures pointed to more losses on Thursday, with Dow futures down as much as 100 points in premarket trading as concerns surrounding global growth, uncertainty in China and fresh lows in oil prices continued to grip markets.

Having raised expectations too high in December, however, Draghi is likely to stop short of making concrete promises, emphasizing instead the central bank’s readiness and ability to act.

Minutes from the bank’s December rate meeting also indicated a greater willingness on the part of policy makers to cut the deposit rate further. Stocks have been extremely volatile in recent sessions as oil prices have plunged, dragging down energy shares. “Markets will be looking for signs as to whether the renewed fall in the oil price, ongoing concerns about China and financial market weakness will see the dovish contingent of the governing council regaining the upper hand”, he argued.

But ECB chief Mario Draghi “will nevertheless surely indicate that the door is still open to further easing in the coming months”, Cates said.

Stimulus measures announced by a central bank can have a far-reaching impact on businesses, investors and consumers.

The euro eased against the dollar as Draghi, speaking after the ECB kept its main rates on hold, told reporters the Bank expected rates to “stay at present or lower levels for an extended period of time”. The measure is meant to encourage banks to lend cash out rather than hold on to it. That in turn will boost growth – that’s the idea anyway.

In the bond markets, the yield on the 10-year German bund, considered the eurozone benchmark, dropped 4 basis points to 0.377% (http://www.marketwatch.com/story/german-bund-treasury-yields-tumble-nearly-9-month-low-2016-01-21), the lowest in almost nine months. “He was a little bit more candid in terms of the March meeting being important and that is perhaps slightly more to-the-point than markets had expected”.