Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Will Super Mario save the day again? That’s the question on investors lips today as the European Central Bank holds one of the most eagerly awaited policy meetings in years.
The eurozone economy is weak, factory output is falling, and Germany may be entering recession. So, many economists predict the ECB will unleash a new stimulus programme in an attempt to spur growth.
That could include hitting banks with deeper negative interest rates, to force them to lend, or even a new QE bond-buying programme.
But ECB president Mario Draghi may have a fight on his hands today, at his penultimate governing council meeting before stepping down.
Hawkish colleages, including Klaas Knot of the Netherlands and Germany’s Jens Weidmann, have pushed back against launching more QE.
However, some sort of stimulus package seems inevitable today — if only because the markets are convinced it’s going to happen. Back in June, Draghi pledged to launched more stimulus if the economic landscape deteriorated – and thing certainly haven’t improved….
Stewart Robertson, senior economist at Aviva Investors, says there is “little doubt” that the ECB will provide fresh stimulus today.
The only debate is about the form of the easing that will be provided. How swiftly things change: it was all so different 18 months ago.
At the start of 2018, everyone was optimistic about the Eurozone’s prospects. After a year of stellar growth (for the Eurozone at least) in 2017, the path seemed clear for the ECB to prepare the ground for lift off. After a decade in the doldrums, the economy was booming and the ECB could taper its asset purchases and start to push policy interest rates up from historic lows.
“The change in stance has been brought about by renewed economic stagnation in key areas, persistently low inflation and downside risks to growth from trade and tariff worries as well as the cyclical downswing within manufacturing and industry.
The governing council is meeting this morning. Its announcement comes at 12.45pm UK time, although we may only get the full details at Draghi’s press conference 45 minute later.
Also coming up today
It’s a busy morning for retail news with John Lewis, Morrisons and Co-operative Group all reporting results.
John Lewis has posted a £25m loss, due to ongoing problems at its department stores, while Morrisons has expanded its deal with Amazon (more on this shortly).
European stock markets are expected to continue to rally ahead of the ECB meeting. Britain’s FTSE 100 is expected to gain another 0.5%, to a new five-week high.
- 10am BST: Eurozone industrial production for July
- 12.45pm BST: ECB monetary policy decision
- 1.30pm BST: ECB president Mario Draghi’s press conference
- 1.30pm BST: US inflation figures for August