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 Markets had been wondering what Mario Draghi had left up his sleeve
but any doubts were dispelled as the ECB also took it its deposit
rate down to -0.4 percent and launched another round of what will be
zero-interest lending operations.
The move to start buying non-financial sector corporate debt will
help add another 20 billion euros a month to its already massive
asset-purchase program.
"This was a much bigger bazooka than the market was expecting and
shows the ECB trying to get ahead of the confidence curve after
learning its lesson," Saxo Bank's head of FX strategy John Hardy
said.
The euro sank a full cent against the dollar to a one-week low of
$1.0863 per dollar from around $1.0970 before the announcement. It
also fell by more than half a percent against the Swiss franc, yen
and sterling.
German Bunds rallied, with futures hitting the day's highs at 163.00
and 10-year yields down 5 basis points to 0.19 percent.
Shares surged too, with the FTSEurofirst 300 index jumping 2.5
percent to add to the 13 percent it has gained over the last month.
The euro zone blue-chip index soared 3.6 percent, with banking
stocks among the strongest gainers.
U.S. futures pointed to solid gains for Wall Street when it resumes.
Weekly jobless claims will be the day's main U.S. data.
All eyes were firmly on Frankfurt and Mario Draghi's 1330 GMT news
conference, at which he will explain the rationale for the ECB's
shock and awe tactics.
A Reuters poll beforehand had shown economists expecting only
another 10 billion euros a month would be added to its 1.5 trillion
euro bond-buying program and none had expected the bank's main
refinancing rate to go to zero.
The ECB will also release new economic staff forecasts at the news
conference which are likely to show inflation this year at zero or
even negative, something it has never before predicted for any year.
Oil prices, the sharp fall in which over the last 1-1/2 years has
been one the key drivers for the slump in inflation, were steady in
early European trading, with benchmark Brent futures holding at just
over $40 a barrel.
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KIWI CLIPPED
The big surprise in Asia overnight came from New Zealand's central
bank, which pre-empted the ECB by cutting its main interest rate to
a record low 2.25 percent.
The Kiwi dollar tumbled to $0.6618 and Reserve Bank of New Zealand
Governor Graeme Wheeler cited China as a major risk, reflecting
global concerns over a slowdown in the world's second-biggest
economy.
"If China had a very significant and prolonged devaluation, it would
in essence spread deflation around the world," Wheeler told
reporters, adding that China was building up a number of serious
imbalances.
Asian stocks edged up meanwhile, encouraged by the previous day's
rally in crude prices and expectations that an aggressive showing
from the ECB later could see dovish reactions from the Bank of
Japan, Fed, Swiss National Bank and Bank of England which all meet
over the next week and a bit.
MSCI's broadest index of Asia-Pacific shares outside Japan
nudged up 0.3 percent. Volatile Shanghai stocks, however, dropped 2
percent after stronger-than-expected local inflation data was
interpreted as a negative for the struggling economy. [.SS]
South Korea's KOSPI rose 0.8 percent and Hong Kong's Hang Seng
gained 0.6 percent. Japan's Nikkei climbed 1.3 percent.
Back in European trading, as the euro dropped, the dollar also
spiked to 114.09 yen against the safe-haven Japanese, while Canada's
decision on Wednesday not to cut its interest rates kept Canada's
dollar near a four-month high.
(Editing by Catherine Evans)
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