European Central Bank Cuts Europe’s Growth Forecast; Announces More Stimulus


Gold: Gold edged up Friday as investors anxious about a sharp slowdown in global growth after the European Central Bank slashed growth outlook and weak Chinese data, but a rally the Dollars kept gold on track for its 2nd weekly decliner. Germany's benchmark 10-year bond yield took a step closer to zero percent and both German and French benchmark yields were at their lowest level since 2016 - the year that saw the European Central Bank ramp up stimulus and cut rates to fight deflation and weak economic growth.

Is this cause for alarm?

Friday's slump was the biggest so far this year for the Shanghai Composite Index. The movement follows the news that the United States trade deficit widened to a 10-year high in 2018, despite President Trump's efforts to narrow it. It also cut its growth and inflation forecasts while offering banks a new set of cheap loans to bolster economic growth.

At midday, the Dow Jones Industrial Average fell 141.88 points, or 0.56 percent, to 25,331.35. The pressure looked to continue on Wall Street, with S&P 500 E-Mini futures easing 0.4 percent. "We were not expecting something so clear, so soon, and markets were not either, so bond yields are likely to stay low for longer".

Investors had been waiting for the jobs report to provide more clues on the state of the world's biggest economy and were surprised to learn US nonfarm payrolls increased by 20,000 last month, trailing estimates for a 180,000 increase.

On currency markets, the euro inched up to $1.1209 after tumbling 1% on Thursday to touch $1.1176 - its lowest since June 2017. The yield on the 10-year U.S. Treasury fell 4 basis points.

The announcement and an extension of stimulus is the latest warning of a lean road ahead after China unveiled a target for growth that would be its slowest in three decades and as the US Federal Reserve indicated it will hold off any fresh rate hikes this year.

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"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.

Oil futures fell around $1 with USA crude at $55.75 a barrel, while Brent crude fell to $65.14. So far, oil demand has remained steady, where imports of crude oil remained above 10 million barrels per day (bpd).

USA crude was last down 35 cents at $56.31 a barrel, while Brent crude fell 49 cents to $65.81.