Euro zone banking shares jumped over three percent, the euro fell and Italy’s bond yields tumbled on Friday after the European Central Bank’s Benoit Coeure said a new round of cheap multi-year loans to banks was possible.
Weak economic data, combined with uncertainty over Brexit and global trade tensions, have raised expectations that fresh stimulus measures from the ECB are likely in coming months.
That speculation got a fresh boost after ECB board member Coeure said the central bank was discussing the idea of issuing new multi-year cheap loans to banks, which in some countries face a funding cliff-edge next year when previous loans must be repaid.
Banks in Italy and other southern European countries in particular could face funding problems as the ECB’s most recent Targeted Long-Term Refinancing Operation (TLTRO) nears its repayment date in 2020.
The prospect of fresh ECB stimulus cheered banking stocks, which have been hurt by an era of negative interest rates, as well as southern European bond markets.
An index of euro zone bank shares was up 3.8 percent — it was set for its biggest one-day gain in a month.
Relief also washed through Italian markets, which in particular have been hit by concerns about weakening growth.
