Published: Sun, March 22, 2020
Markets | By Otis Pena

Asia stocks dive as ECB bazooka fails to ease fears

Asia stocks dive as ECB bazooka fails to ease fears

The scheme will be temporary, lasting until the bank judges the crisis to be over "but in any case not before the end of the year" the ECB governing council wrote in a statement.

The ECB also said that it made a decision to expand the range of eligible assets under the corporate sector purchase program to include non-financial commercial paper. Soon after the European Central Bank announcement, French President Emmanuel Macron called for more fiscal action from leaders.

"Extraordinary times require extraordinary action", ECB President Christine Lagarde said.

The ECB statement on doing "everything necessary within its mandate" echoed its former intervention in the sovereign debt crisis.

Fears of global recession have grown as the pandemic triggers unprecedented lockdowns, upending normal life and bringing top economies to a grinding halt.

Japan's Nikkei-225 led the gains, opening more than two percent higher as the news from Europe brightened sentiment despite another black day on Wall Street.

The practice is known as quantitative easing (QE) and is a key crisis-fighting tool in monetary policy.

The ECB also said that the Governing Council will be fully prepared to increase the size of its asset purchase programs and adjust their composition "by as much as necessary and for as long as needed".

Mexico border is closed to non-essential travel as coronavirus outbreak continues
Other essential workers, such as medical workers and airline employees, would be allowed to cross the border at land crossings. However, it was less clear whether, for instance, visits to family members on the other side of the border will be allowed.

By massively buying up government and corporate debt, the ECB aims to keep liquidity flowing in a bid to encourage bank lending and investment.

The ECB president was under pressure to reassure investors after spooking bond markets with a seemingly off-the-cuff remark last week that it was not the central bank's job to help "close spreads".

The ECB's latest medicine could be "a game changer for the euro area economy and credit markets" if accompanied by fiscal action from eurozone governments, said Pictet Wealth Management strategist Frederik Ducrozet.

(3) To ease the collateral standards by adjusting the main risk parameters of the collateral framework.

The European Central Financial institution has taken a string of measures to stem an economic meltdown attributable to coronavirus epidemic, promising to do all the things crucial to maintain the euro collectively.

It also unveiled a new credit facility to help households and business stay afloat.

The sources added that there was no objection to including Greece government bonds in asset purchases for the first time as the current difficulties were not particular to Greek policy so keeping them out would essentially punish the country.

However, the European Central Bank left its minus 0.5 percent deposit rate unchanged just as it did last Thursday, another sign that policymakers may now see a further cut doing more harm than good.

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