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European Central Bank will stop its bond-buying scheme, €30bn a month, next December

17 June 2018
European Central Bank will stop its bond-buying scheme, €30bn a month, next December

Despite that infrequent explicit indication of rates moves in its forward guidance, ECB President Mario Draghi told press that the timing to raise rates had not been discussed in Riga.

The euro fell and eurozone stocks surged after the European Central Bank said it expected interest rates to remain at current record lows for at least another year.

The ECB now plans to reduce monthly asset purchases between October and December to 15 billion euros until the end of 2018 and then conclude the program.

This development occurred in the wake of a decision made by the European Central Bank to keep interest rates at record lows into 2019 while simultaneously moving to end its massive bond purchase scheme which was previously implemented as part of its anti-crisis measures.

CURRENCIES: The dollar was flat at 110.65 yen and the euro strengthened to $1.1591 from $1.1560. The global crude benchmark, meanwhile, gave up almost all of the gains it saw a day earlier on the possibility that the Organization of the Petroleum Exporting Countries will decide to boost output when members and other major oil producers meet next week. The Euro plunged more than two big figures from above 1.1800 to below 1.1600.

Benefiting from the ECB's decision were stock markets on both sides of the Atlantic.

The Fed has already ended its own bond-buying program, which had similar goals, and has made seven interest rate increases to the current policy rate of 1.75-2.0 percent.

The US Dollar received extra support following yesterday afternoon's US retail sales, which posted their largest increase in six months.

In the bond markets, yields on 10-year German bonds fell to 0.443 percent.

Technology stocks were the biggest advancers, with Facebook and Alphabet leading the pack.

The Hong Kong Monetary Authority (HKMA) raised the base rate charged through overnight discount window by 25 basis points on Thursday to 2.25 per cent after the Fed raised interest rates by a quarter of a percentage point.

It stretched overnight losses to brush $1.1555, lowest since May 30.

China will impose an additional 25 percent tariff on 659 US goods worth $50 billion, the official Xinhua news agency reported on Saturday, citing the Tariff Commission of the State Council.

But on Friday US President Donald Trump announced tariffs on US$50 billion worth of Chinese imports and Beijing threatened to respond in kind, stopping the market in its tracks.

CBOT corn and soybean futures tumbled as uncertainty about tariffs and favorable crop weather in the US Midwest prompted funds to liquidate big long positions. Since January, the European Central Bank is buying €60bn in government bonds a month. Traders are anxious about China, Mexico and other countries curbing demand for USA grain and soy exports.

"I think its pragmatic for the Fed to take these moves, because if you are not going to make them now, when are you going to take them", Kully Samra, European managing director at $3 trillion US asset manager Charles Schwab, said.

Volume on U.S. exchanges was 6.75 billion shares, compared with the 6.70 billion average for the full session over the last 20 trading days.