LONDON: European stock markets dropped Wednesday on speculation that the ECB is mulling plans to taper its vast economic stimulus that aims to prop up the eurozone economy.
The European Central Bank has rebutted a Bloomberg report Tuesday of an “informal consensus” among ECB policymakers that the guardian of the euro should gradually scale back its quantitative easing (QE) bond-buying stimulus programme in steps of 10 billion euros ($11.2 billion).
The ECB on Wednesday insisted that policymakers had not even discussed such a move.
“Governing Council has not discussed these topics, as (ECB president Mario) Draghi said at last press conference and during testimony at European parliament,” tweeted ECB media relations chief Michael Steen.
Stock market sentiment was dampened also by mounting expectations that the US Federal Reserve will hike interest rates soon.
Both Frankfurt and Paris equities fell by 0.7 percent in value around midday, while London dropped 0.5 percent compared with Tuesday’s close.
The dollar pushed on with this week’s rally against most other global currencies, scoring another 31-year high against the beleaguered pound.
At 0655 GMT, sterling dived to $1.2686 — last seen in June 1985 — as the unit remained dogged by Brexit fears. Sterling also hit 88.43 pence to the euro — the weakest level in five years.
“European equity markets are on the back foot as concerns grow that central banks are going to pare back accommodative policy,” said Rebecca O’Keeffe, head of investment at stockbroker Interactive Investor.
“Both equity and bond market valuations have been founded on monetary support from global central banks and have arguably become hooked on quantitative easing and low interest rates.
“The possibility of central banks returning to a more normal regime could see taper tantrums resume, volatility spike and investors flee,” she added.
Investors were given a weak lead from Wall Street after comments from two top Federal Reserve officials fanned speculation it would lift borrowing costs before the end of the year.
Talk of an increase returned after data last week showed US factory activity rebounded in September, while trading floors gear up ahead of a crucial jobs report Friday.
On Tuesday, Cleveland Fed president Loretta Mester said she saw a strong case for a rate hike in November. That was followed by Richmond Fed head Jeffr.
