If the US is slowing down, Europe is headed for 'an abrupt stop'

(GLYN KIRK/AFP/Getty Images)
  • The ECB’s Mario Draghi signalled any rate rises might be delayed after saying he sees “persistent deterioration of external demand,” in the economy.
  • “There is probably a little more ECB dovishness to be priced in yet,” says Neil Wilson at Markets.com
  • The Euro Stoxx 50, France’s CAC and the Dax Index are all down at least 0.3%. The dollar gained, the kiwi plunged.

The slowdown in the global economy is hitting Europe.

So says European Central Bank President Mario Draghi, who outlined the issues in a much-watched speech on growth in the eurozone region.

“We are now seeing a more persistent deterioration of external demand. But a ‘soft patch’ does not necessarily foreshadow a serious slump,” Draghi was cited as saying by Investing.com.

The Euro Stoxx 50, France’s CAC and the Dax Index are all down at least 0.3%.The dollar strengthened against a basket of currencies, hitting 96.26 in Wednesday trading, on the back of skittish investors heading for safety, says Neil Wilson, at Markets.com.

“If things are slowing down in the US and globally, it’s looking like an abrupt stop in the euro zone,” Wilson said. “There is probably a little more ECB dovishness to be priced in yet.”

Draghi suggested there could be a delay in raising borrowing costs:

“Our current reaction function is well designed to respond to further delays in inflation convergence. In such a situation, just as we did at our March meeting, we would ensure that monetary policy continues to accompany the economy by adjusting our rate forward guidance to reflect the new inflation outlook,” Draghi was quoted as saying by CNBC.

Elsewhere in markets, the New Zealand central bank today left interest rates on hold, “but indicated that their next move is likely to be to ease policy,” said Societe Generale’s Global Head of FX Strategy Kit Juckes. The kiwi plunged on the news, falling 1.3% against the dollar to the lowest in more than two weeks as of 9.45 a.m. in London (5.45 a.m. in New York).

US futures a signalling a flat start on Wall Street. Those on the S&P 500, the Dow and the Nasdaq are all up or down less than 0.1%.

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