Published: Sat, December 10, 2016
Economy | By Melissa Porter

ECB Extends but Tapers Stimulus Program

If Draghi doesn't seem willing to use the bond-buying program now to contain Italian yields if needed, "it would dent confidence in the central bank's ability to control the bond markets", he said.

By 1418 GMT, it was 6.4 bps on the day at minus 0.745 percent.

The S&P 500 Index slipped 0.1 per cent after closing on Wednesday at a record high.

The ECB appears to lean towards announcing an extension of its quantitative easing program, but any sign that it could initiate tapering asset purchases could counterbalance the effect of extending its stimulus program.

It will reduce the amount of bonds it buys after March to 60 billion euros ($64 billion) a month from 80 billion euros. "It's going to be one of the most hard to interpret that we had for a long time".

Traders will focus on the Fed's economic projections, known colloquially as the dot plot, for indications of any change in expectations following Donald Trump's surprise election as US president on November 8. Markets have been betting that President-elect Donald Trump will carry through on promises to spend more on infrastructure such as roads and bridges after he is inaugurated January 20, boosting growth and inflation in the months ahead.

Draghi said stimulus was still needed despite a somewhat brighter economic picture because "uncertainty is everywhere. just look at the election calendar for next year".

"(That's) the best of both worlds for investors".

Elsewhere, shares in Swedish biometric technology firm Fingerprint Cards fell 10 percent, the top decliner in the STOXX Europe 600 index, after the company sharply cut its 2016 revenue forecast.

It was trading around $1.0576, down almost 0.4 percent against the dollar, having spiked as high as $1.0875 on Thursday in initial reaction to the European Central Bank move.

The breakdown of the figures continues to suggest that growth will slow in 2017 from around 1.6% this year but that doesn't alter the prospect of the European Central Bank tightening monetary policy at some stage in future.

"The Central Bank 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", a spokeswoman said.

The bond purchases pump freshly created money into the banking system in hopes of increasing weak inflation and encouraging growth.

Beyond the stimulus program, the ECB's 25-member governing council kept its key interest rate benchmarks unchanged.

That drop nudged the dollar down a touch to 113.73 yen while the dollar index dipped 0.05 percent.

Asian shares edged down on Friday but were on track for weekly gains. The euro slid as much as 1.5 percent before paring losses to trade 0.1 percent lower at $1.0651.

Japan's Nikkei stock index ended 1.2 percent up at its highest closing level since December 2015.

The issue is now being debated in the Supreme Court with a ruling expected early next year.

Oil traders are awaiting the results of this weekend's meeting between OPEC and non-OPEC oil producers in Moscow, regarding implementing the cartel's stated intention to cut oil-production levels. Benchmark U.S. crude rose 79 cents, or 1.6 per cent, to $50.56 per barrel in NY.

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