Europe Economy

How It Happened: Markets, ECB and BoE Decisions

ECB European Central Bank
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The European Central Bank took a historic step on Thursday by providing forward guidance on interest rates. ECB President Mario Draghi suggested interest rates will stay low for an "extended period of time". The euro fell against the dollar and European stocks rallied.

The ECB move followed a statement from the Bank of England which warned that bond yields had risen too far, too fast. Sterling weakened against the dollar on the news.

Here's how it all unfolded:

4:38 p.m. BST: European stocks finished up sharply higher. Happy 4th of July.


Italian Conundrum

4.25 p.m. BST: IMF has cut Italy's GDP forecast and asked Enrico Letta's government to accelerate reforms. The new IMF forecast is for a contraction of 1.8 percent in 2013, compared to a 1.5 percent contraction previously. But no one's paying any attention. The FTSE MIB is up 3 percent going into the last five minutes of trade.

3.49 p.m. BST: Meanwhile, the Egyptian stock exchange closed 7.3 percent higher, after the ousting of President Mohammed Morsi.

3.25 p.m. BST: Major stock market rally under way in afternoon session in Europe after ECB and BoE guidance.

2.38 p.m. BST: More Twitter reaction after both the BoE and the ECB offered forward guidance on the same day:

1.55 p.m. BST: A journalist from Les Echos says today is a historic day, referring to his predecessor Jean-Claude Trichet who said the ECB "never pre-commits". Draghi says the bank has an open mind on all rates, including negative deposit rates.

1.35 p.m. BST: The euro falls sharply against the dollar as Draghi speaks.

1.10 p.m BST: The FTSE 100 index jumped after the Bank of England flagged looser monetary policy. The graph below shows the move in today's session.

12.56 p.m. BST: The biggest question for the ECB press conference: will Draghi take up the gauntlet that Carney has thrown down? John Wraith, fixed income strategist at BofA Merrilll Lynch Global Research tells CNBC he hopes to find out from the press conference if Draghi is comfortable with front-end rates.

12.45 p.m BST: The ECB leaves rates on hold. Read the full statement from the ECB here. Watch the video below for CNBC's coverage of the decision and analyst reaction.

12.15 p.m. BST: Robert Wood, UK Economist at Berenberg reacts to the move in sterling. "It's a relatively dovish message on policy. We're looking at slightly looser policy than was previously priced in and you're starting to see maybe the credentials of Mark Carney," he tells CNBC.

12.00 p.m. BST: The Bank of England leaves interest rates and the size of its asset purchase program unchanged.

11.55 a.m. BST: CNBC is in Frankfurt for the ECB decision.


11.20 a.m BST: Looking ahead to the ECB decision in Frankfurt, Horst Loechel, professor of economics at the Frankfurt School of Finance and Management says the trouble in Europe is the demand for credit, particularly in the south of Europe.

"The European Central Bank cannot do much more.The interest rates are already very low…even if we see today a decline of 0.25 percent this will not change much," he says. "We do need some political support to fund and re-fund small- and medium companies particularly in the south of Europe."

10.50 a.m. BST: Meanwhile investors are gearing up for the Bank of England's monthly monetary policy decision at 12.00 BST, New governor Mark Carney votes for the first time.

RBS's Eric Lascelles tells CNBC Carney is probably more willing to act and bolder than many observers are willing to give him credit for, but warns we shouldn't expect miracles.

"Some of the Carney halo does have to do with an economy that happened to do well. I think some of the halo, though, is deserved," he said. Being explicit about when stimulus would be removed and perhaps even indicating the economic conditions that would be necessary were likely to come to the U.K., Lascelles said.

10.38 a.m. BST: Egypt's stock market is also surging after the ouster of Mohammed Morsi. The head of Egypt's constitutional court Adli Mansour has just been sworn in as Egyp'ts interim president.

10.00 a.m.BST: Portuguese stocks are staging a relief rally.

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