Europe open: ECB may cut QE purchases by at least half, report says

Alexander Bueso Sharecast | 13 Oct, 2017 10:00 | | |

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Stocks have begun the session in a mixed fashion amid reports that European Central Bank policymakers are closer to an agreement on how to go about tapering its asset purchases.

According to Reuters, which cited five people with direct knowledge of the discussion, the ECB's rate-setters are in broad agreement about extending their asset purchases - albeit at a slower pace - for another nine months starting from January 2018.

To be more precise, according to Bloomberg QE purchases may be cut by "at least" half beginning from that same date.

Amid those reports, as of 0923 BST the benchmark Stoxx 600 was up by 1.06 points or 0.27% to 391.34, alongside a minimal 1.97 point advance on the German Dax to 12,984.86 and a 0.17% rise on the FTSE Mibtel to 22,437.

Acting as a backdrop, investors were waiting on a barrage of US data scheduled for release later in the day, including September data on consumer prices and retail sales.

The former, in particular, would be watched particularly closely, given recent low readings on the US personal consumption expenditures price deflator, the Fed's favoured inflation gauge.

Those CPI figures would arrive amid a debate around the most probable policy path for the US central bank in 2018, with some - albeit admittedly only a few - economists of the belief that central bankers around the world may need to revisit their models to account for globalisation, among other factors.

"Yesterday’s PPI data for September would also appear to suggest that price pressures are picking up and if today’s headline CPI number follows suit, then it would be a major surprise if US policymakers were to backtrack on a December rate rise now. It is expected that September CPI will see an uptick from 1.9% to 2.3%.

"For the moment markets are pricing a 76% probability of a move in December, they just aren’t so sure about how many are coming in 2018 and that’s the point," said CMC Markets UK's chief market analyst, Michael Hewson.

Meanwhile, in the euro area's largest economy, consumer prices were ahead by 1.8% in September in year-over-year terms, according to the Ministry of Finance.

Yet at the 'core' level, the rate of price gains slipped from 1.6% to 1.5%.

Nonetheless, commenting on the data Claus Vistesen at Pantheon Macroeconomics said:"We think the underlying trend in the German core rate is up, in line with a tighter labour market and stronger GDP growth. We are looking for an increase to just under 2% in the next the six-to-nine months. In the short run, though, the core rate could well fall a bit further as net rent inflation eases after its recent jump."

In Italy, harmonised consumer prices advanced at a 1.3% clip year-on-year last month, ISTAT reported, confirming a preliminary estimate.

Deutsche Bank, Citigroup and HSBC acquiesced to a combined $132m fine to settle a class action lawsuit brought against them in the States for having allegedly manipulated LIBOR interest rates.

Spain's ACS will table an offer next week, approximately half in shares and half in stock, for toll road firm Abertis, Reuters said in a sourced report.

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