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Market Update

ECB Lowers Key Rates and Expands Asset Purchase Program


Author: Lucy Stoeva
ticker.com
Last Update: 2:53 PM ET March 10 2016

4:00 PM Frankfurt, Germany – European Central Bank expanded stimulus program in scope and scale and also cautioned future rate cuts are less likely after lowering rates today. Hannover Rück announced record 2015 profit and dividend. Lagardere tumbled 13%.]

European Central Bank offered more stimulus steps, lowered rate deeper in the negative territory and expanded bond purchase program in size and scope.

European markets closed lower Thursday reversing the sharp rise earlier on larger than expected measures to stimulate the economy from the European Central Bank after central bank said more rate cuts are less likely.

The central bank cut its main refinancing rate to 0% and lowered the deposit rate deeper by 0.1 percentage point into negative zone to minus 0.4%.

The central bank increased the asset purchase program to €80 billion a month from €60 billion, far ahead of expectations and also expanded to program to corporate bonds.

Initially, the euro fell against the dollar but market indexes reversed the course after the President Draghi cautioned that future rate cuts are unlikely.

The banking sector benefited from ECB’s new refinancing round. Shares of Italy’s UniCredit added 2.3%, while Spain’s Banco Popular Español soared 4.6%.

Insurers were also on the rise after British insurer Aviva and reinsurer Hannover Rück posted upbeat annual results.

On the negative side, oil and energy companies declined after Brent crude futures slipped 2.26% to $40.14, while WTI crude oil dropped 1.59 % to $37.68.

The FTSE 100 index fell 64.91, or 1.06%, to 6,080.41, while the DAX index declined 140.57, or 1.45%, to 9,582.52.

In Paris, the CAC 40 index shed 30.95, or 0.70%, to 4,394.70.

Aviva Plc advanced 1.74% to 467 pence after the British insurer said it would achieve its target of £225 million in integration synergies one year ahead of schedule.

The company reported a solvency capital ratio of 180%, sufficiently high to cover underwriting, investment and operational risks under the new European rules.

Operating profit was £2.7 billion, above the previous forecast for £2.49 billion.

The company announced total 2015 dividend of 20.8 pence, up 15% from the 2014 dividend.

Hannover Rück SE added 1% to €95.57 after the German reinsurer announced record 2015 net profit and dividend of €4.75 per share.

The company plans to focus on earnings, not premiums, and may pay a special dividend to shareholders, according to CEO Ulrich Wallin.

Premiums already increased 20% in 2015 and are expected to remain stable this year.

Net profit reached €1.15 billion in 2015 and the insurer estimated net profit of at least €950 million in 2016.

Hannover Re also said it anticipates a difficult year for reinsurers amid fierce competition and low interest rate levels.

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Sources: Data collected by 123jump.com and Ticker.com from company press releases, filings and corporate websites. Market data: BATS Exchange. Inc