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European Central Bank cuts growth, inflation forecasts

10 March 2019

However, the bank's governing council rated the probability of a euro zone recession as "very low", he told a news conference.

Those losses continued in Asia, where Shanghai, which has surged about a quarter so far this year, shed 4.4 percent, while Hong Kong was off 1.9 percent and Tokyo ended two percent lower with better-than-thought growth figures unable to help the Nikkei 225.

E-Mini futures for the S&P 500 eased 0.1 percent. Officials said they'll freeze the interest rate this year while also offering banks cheaper loans to prompt more lending to businesses.

The mood had already been brittle after the European Central Bank slashed its growth forecasts and surprised everyone with a new round of policy stimulus, leaving investors fearing the worst for the global economy.

The sentiment in Asian markets was negative on Friday morning before trading began, after Thursday saw European Central Bank (ECB) Chief Mario Draghi announce a U-turn on monetary easing, reflecting growing unease over European economic activity just months after the end of years of quantitative easing was announced. "We were not expecting something so clear, so soon, and markets were not either, so bond yields are likely to stay low for longer".

The dollar weakened 0.2% after reaching a new 2019 high against a basket of currencies that includes the euro as traders bet the United States would fare better than Europe in the coming months despite some soft patches in the USA economy.

Gold prices moved higher on Friday, with investors seeking the safe haven asset, after equities tumbled on disappointing economic data out of the USA and China and on lingering uncertainty about U.S. The dollar weakened after seven days of gains and Treasuries were steady.

The news saw the euro slip against the USA dollar and the Swiss Franc. There was also a chance the jobless rate could fall by more than forecast given the recent strength in employment.

But investors do not believe that the European Central Bank will be able to meet even this target and pushed out their expectations on a rate rise even further into the future.

The greenback reached a new 2019 high against a basket of currencies and was last at 97.548.

The Japanese yen advanced 0.4 percent to 111.12 per dollar.

"The ECB's updated forecasts imply that, at best, growth slowly returns to trend over the next few years, meaning it will be very hard to get underlying inflation up", wrote analysts at ANZ in a note.

West Texas oil futures slipped below US$56 a barrel in NY as the weakening outlook for the global economy and rising crude stockpiles in the USA signaled that markets will remain comfortably supplied.

In commodity markets, the rise in the dollar restrained gold to $1,287.19 per ounce.

West Texas Intermediate crude dropped 1 percent to $56.11 a barrel.

European Central Bank cuts growth, inflation forecasts