FRANKFURT — The European Central Bank said it would step up its bond-purchase stimulus to support an economy whose recovery is expected to lag a year behind the rebound in the U.S., held back by slow vaccine rollouts and less relief spending by governments.
The central bank for the 19 countries that use the euro said Thursday that over the next quarter the purchases would be conducted “at a significantly higher pace than during the first months of the year.”
The move is aimed at preventing a premature rise in borrowing costs while businesses are still struggling with coronavirus restrictions like curfews and shutdowns. Yields on long-term government bonds have risen by about 0.3% since the start of the year in the eurozone. That is not much, and rates remain low. But economists say it is too early for the eurozone to withstand higher rates, usually associated with recovering growth and inflation.
The rise in longer-term borrowing rates is regarded as a spillover from the U.S., where the economic recovery is expected to be faster. The eurozone is still in a double-dip recession and is seen by economists as not ready for rising rates. Output shrank 0.6% in the last three months of 2020 and probably declined again in the first quarter of this year, say economists.
China was the only major economy to grow last year, and the U.S. is expected to reach pre-pandemic levels of output by the middle of this year.
By contrast, the eurozone economy is not expected to recover until mid-2022, held back by a slow vaccine rollout and lower levels of government relief spending compared with the U.S. The U.S. Congress on Wednesday approved a wide-ranging $1.9 trillion relief package pushed by new President Joe Biden, coming on top of previous relief legislation under predecessor Donald Trump.
ECB President Christine Lagarde told a news conference that the rise in market borrowing rates, “if left unchecked, could translate into a premature tightening of financial conditions for all sectors of the economy. This is undesirable.”
Lagarde urged European leaders to promptly implement the European Union’s 750 billion-euro recovery fund which is aimed at supporting government spending over the next several years. She said that the “massive” $1.9 trillion relief package passed Wednesday in the U.S., a key trade partner, would boost demand from outside the eurozone.
The bond purchases have the effect of pushing down bond yields, which are used as benchmarks for borrowing across the region. So the ECB’s move would in theory help keep credit cheap for companies who need to invest or borrow to get through the pandemic. Businesses are reeling from the economic impact of government restrictions on public life.
Lagarde didn’t specify an amount for the accelerated bond purchases. The ECB bought 59.9 billion euros worth of bonds in February and 53 billion euros in January. The purchases ran as high as 120 billion in June 2020.
The purchases will come out of the total of 1.85 trillion-euro set aside for the program; almost 1 trillion euros of that has yet to be used. The ECB says it will continue the purchases until at least the end of March 2022, and in any case until it judges that the pandemic crisis phase is over.
The ECB’s decision to step up its stimulus caused an immediate reaction in financial markets, with bond yields sliding and stock markets rising in Europe.
The ECB is the monetary authority for the 19 of 27 European Union member countries that have joined the common currency. It plays a role analogous to that of the U.S. Federal Reserve, the Bank of Japan or the Bank of England in the U.K. It can steer market interest rates in ways best for the economy, using short-term benchmarks such as its weekly lending to bank or intervening in the bond market to affect longer-term rates.
TORONTO – Strength in the base metal and technology sectors helped Canada’s main stock index gain almost 100 points on Friday, while U.S. stock markets also climbed higher.
The S&P/TSX composite index closed up 93.51 points at 23,568.65.
In New York, the Dow Jones industrial average was up 297.01 points at 41,393.78. The S&P 500 index was up 30.26 points at 5,626.02, while the Nasdaq composite was up 114.30 points at 17,683.98.
The Canadian dollar traded for 73.61 cents US compared with 73.58 cents US on Thursday.
The October crude oil contract was down 32 cents at US$68.65 per barrel and the October natural gas contract was down five cents at US$2.31 per mmBTU.
The December gold contract was up US$30.10 at US$2,610.70 an ounce and the December copper contract was up four cents US$4.24 a pound.
This report by The Canadian Press was first published Sept. 13, 2024.
OTTAWA – Statistics Canada says wholesale sales, excluding petroleum, petroleum products, and other hydrocarbons and excluding oilseed and grain, rose 0.4 per cent to $82.7 billion in July.
The increase came as sales in the miscellaneous subsector gained three per cent to reach $10.5 billion in July, helped by strength in the agriculture supplies industry group, which rose 9.2 per cent.
The food, beverage and tobacco subsector added 1.7 per cent to total $15 billion in July.
The personal and household goods subsector fell 2.5 per cent to $12.1 billion.
In volume terms, overall wholesale sales rose 0.5 per cent in July.
Statistics Canada started including oilseed and grain as well as the petroleum and petroleum products subsector as part of wholesale trade last year, but is excluding the data from monthly analysis until there is enough historical data.
This report by The Canadian Press was first published Sept. 13, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in the base metal and energy sectors, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 172.18 points at 23,383.35.
In New York, the Dow Jones industrial average was down 34.99 points at 40,826.72. The S&P 500 index was up 10.56 points at 5,564.69, while the Nasdaq composite was up 74.84 points at 17,470.37.
The Canadian dollar traded for 73.55 cents US compared with 73.59 cents US on Wednesday.
The October crude oil contract was up $2.00 at US$69.31 per barrel and the October natural gas contract was up five cents at US$2.32 per mmBTU.
The December gold contract was up US$40.00 at US$2,582.40 an ounce and the December copper contract was up six cents at US$4.20 a pound.
This report by The Canadian Press was first published Sept. 12, 2024.
