ECB prepares sub-zero relief for wilting Europe

Euro and bond yields wilted on Thursday as a slump in German business confidence piled the pressure on the European Central Bank to push interest rates even deeper into sub-zero territory later.

With the chance of a ECB rate cut priced at about 50-50, the euro was at a two-month trough, as German bond yields were slipping back toward record lows and Europe’s main stock markets shuffled higher.

New German data added to the call for ECB action as it showed business morale there had hit its lowest level since April 2013.

The ripple effect saw neighboring Switzerland’s 50-year government bond yield go negative, meaning none of its bonds now offer buyers any interest.

“The weak macro data this week means the ECB will be forced to act sooner than later,” said Daniel Lenz, a rates strategist at DZ Bank in Frankfurt.

“The German economy is navigating troubled waters,” Ifo President Clemens Fuest added, saying companies there were increasingly concerned about the outlook for their businesses.

Overnight it had been a happier story. Wall Street’s S&P 500 and Nasdaq had both hit record highs after reassuring comments from Texas Instruments about global chip demand blunted the impact of weak earnings from Boeing and Caterpillar.

Facebook also announced forecast-beating revenues, sending its shares higher in extended trading after the closing bell.

The social media firm’s stock has surged over 56% so far this year, despite warnings on future revenue growth from new data privacy rules and forthcoming privacy-focused product changes.