European stock markets rose on Thursday after the ECB unveiled a massive stimulus program and cut interest rates to goose a sluggish eurozone economy.
The euro was volatile, dropping against the dollar in an initial reaction before recovering in late business.
Elsewhere, US stocks pushed higher as trade tensions between the US and China continued to cool and as investors anticipated another interest rate cut next week from the US Federal Reserve.
“We’re swinging back into normal territory with the focus back on trade and monetary policy,” said Art Hogan, chief market strategist at National Securities.
In Frankfurt, the ECB took a key interest rate further into negative territory in its first rate cut since 2016 and announced it would resume stimulus via asset purchases at the rate of 20 billion euros per month and cheap loans to banks.
While the quantitative easing stimulus amount may have been lower than some analysts expected, the tone of the ECB was more dovish.
“This commitment to more QE is open-ended: it will end shortly before the Bank begins raising interest rates,” said Andrew Kenningham, chief European economist at Capital Economics.
Meanwhile, the ECB said it would not raise interest rates until it saw inflation moving up towards its goal of just under 2.0 percent over the medium term.
Key eurozone stock markets were higher at the close thanks to the prospect of cheaper money.
But the euro, in the moments following the ECB’s announcement, fell more than a cent against the dollar, dropping below $1.10.
Then it recovered.
“The euro didn’t quite know what to make of the ECB’s newly announced stimulus package, a mixed bag parting gift from Italian stallion Mario Draghi,” said Connor Campbell at Spreadex.
Initially “the euro was shaken by the confirmation of the central bank’s long-suspected plans” but then became “less concerned,” he said.
“That’s because the plans have been described as ‘less generous’ than first thought, with a certain amount of disappointment that the package wasn’t more robust,” he said.
BK Asset Management’s Kathy Lien said the ECB meeting was “one of the biggest near-term risks for the euro” and that the recovery of the single currency during the session reflected expectations that Frankfurt’s moves “guarantee” a Fed cut next week.
Equity markets also found some support amid signs of easing trade-war tensions between China and the United States.
US President Donald Trump on Wednesday said he would delay hiking tariffs on some Chinese goods, just hours after Beijing announced it would remove a range of American products from its own planned levies.
China added Thursday it was “making inquiries” about buying American farm products including big-ticket products like pork and soybeans.
The more conciliatory tone — after months of rancor — fueled hopes that they could edge towards solving their long-running trade war, which has jolted the global economy and stock markets.
Oil prices fell as a committee of Saudi Arabia and other leading producers pledged to comply with output cuts aimed at rebalancing the sagging market, but offered no further reductions in a sign they are short on options in a market depressed by US-China tensions.
Key figures around 2030 GMT
Euro/dollar: UP at $1.1064 from $1.1010 at 2100 GMT
Euro/pound: UP at 89.67 pence from 89.32 pence
Pound/dollar: UP at $1.2337 from $1.2326
Dollar/yen: UP at 108.11 yen from 107.82 yen
New York – Dow: UP 0.2 percent at 27,182.45 (close)
New York – S&P 500: UP 0.3 percent at 3,009.57 (close)
New York – Nasdaq: UP 0.3 percent at 8,194.47 (close)
London – FTSE 100: UP 0.1 percent at 7,344.67 (close)
Frankfurt – DAX 30: UP 0.4 percent at 12,410.25 (close)
Paris – CAC 40: UP 0.4 percent at 5,642.86 (close)
EURO STOXX 50: UP 0.6 percent at 3,538.86 (close)
Tokyo – Nikkei 225: UP 0.8 percent at 21,759.61 (close)
Hong Kong – Hang Seng: DOWN 0.3 percent at 27,087.63 (close)
Shanghai – Composite: UP 0.8 percent at 3,031.24 (close)
Brent North Sea crude: DOWN 0.7% at $60.38 per barrel
West Texas Intermediate: DOWN 1.2% at $55.09 per barrel