LONDON: The prospect of the European Central Bank eventually winding down its bond-buying stimulus programme rattled investors on Wednesday, dragging stocks lower in Europe and Asia and pushing up government bond yields. US stocks opened slight up.
The chief driver for the market malaise was a Bloomberg report on Tuesday that the ECB would probably wind down its 80 billion euro ($90 billion) monthly bond purchases before ending its quantitative easing programme.
This would mean a taper, following the Fed’s earlier pattern, rather than a sudden ending.
ECB media officer Michael Steen later tweeted that the central bank’s decision-making body had not discussed reducing the pace of its monthly bond buying.
The report comes as investors are wondering whether the central bank asset-buying stimulus programmes that have buoyed markets across the globe are reaching their limits.
ECB President Mario Draghi confounded the expectations of many in markets when he said after the bank’s last meeting that policymakers had not discussed extending its scheme.
“I am surprised at the reaction, but it’s just this notion that the ECB may be discussing tapering one day that has upset the market,” said ING rates strategist Benjamin Schroeder. “If you kick off a QE programme you have to think from the start about how you will exit it.” European stocks fell. The pan-European STOXX index fell nearly 1 per cent, having risen 0.8 per cent on Tuesday.
Shares in Deutsche Bank, which like other Eurozone lenders has had its profitability questioned by the ECB’s ultra-low interest rates, initially rose but were last down 0.1 per cent.
MSCI’s broadest index of Asia-Pacific shares outside Japan slipped 0.4 per cent. Japan’s Nikkei/closed up 0.5 per cent, aided by a weaker yen.
German 10-year government bond yields rose 6 basis points to minus 0.03 per cent. Ten-year yields in Italy and Spain, where borrowing costs have been anchored by ECB bond purchases, soared 10 bps at one point before pulling back slightly.
