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ECB Aid Underpins European Shares; Lufthansa Issues Dire Warning about Airline Industry

James Hyerczyk

The major European stock indexes are edging higher Thursday morning after the European Central Bank (ECB) announced a 750 billion Euro ($820 billion) bond-buying program designed to help Euro Zone economies combat the impact of the coronavirus outbreak.

“The ECB will ensure that all sectors of the economy can benefit from supportive financing conditions that enable them to absorb this shock,” the central bank said in a release. “This applies equally to families, firms, banks and governments. The Governing Council will do everything necessary within its mandate.”

At 09:05 GMT, the U.K.’s FTSE 100 is trading 5098.62, up 18.04 or +0.36%. Germany’s DAX is at 8547.07, up 105.36 or 1.25% and France’s CAC 40 Index is trading 3875.60, up 120.76 or +3.22%.

The Governing Council decided the following:

(1) To launch a new temporary asset purchase programme of private and public sector securities to counter the serious risks to the monetary policy transmission mechanism and the outlook for the euro area posed by the outbreak and escalating diffusion of the coronavirus, COVID-19.

(2) To expand the range of eligible assets under the corporate sector purchase programme (CSPP) to non-financial commercial paper, making all commercial papers of sufficient credit quality eligible for purchase under CSPP.

(3) To ease the collateral standards by adjusting the main risk parameters of the collateral framework. In particular, we will expand the scope of Additional Credit Claims (ACC) to include claims related to the financing of the corporate sector. This will ensure that counterparties can continue to make full use of the Eurosystem’s refinancing operations.

European Sell-off Pauses as Stimulus Calms Recession Panic

European shares are moving away from near-seven year lows on Thursday as another set of dramatic stimulus measures by the bloc’s central bank injected a ray of hope around its preparedness to tackle a major health crisis gripping the continent.

Airline Industry May Not Survive Without State Aid:  Lufthansa

Lufthansa said that the airline industry may not survive without state aid if the coronavirus epidemic lasts for a long time, as it throws everything at bringing home stranded travelers and keeping industrial supply chains open, Reuters reported.

The German airline group has slashed capacity, proposed short-time working and suspended its dividend, saying it was impossible to forecast the impact of coronavirus on profitability.

“The spread of the coronavirus has placed the entire global economy and our company as well in an unprecedented state of emergency,” CEO Cartsten Spohr said in a statement. “At present, no one can foresee the consequences.”

“In addition, we are doing our utmost to help ensure that supply chains for many thousands of businesses do not break down by mobilizing additional capacity for air freight transport,” said Spohr.

Lufthansa has already held talks with the German government on providing liquidity, including through special loans from state development bank KfW, said Reuters.

“The longer this crisis lasts, the more likely it is that the future of aviation cannot be guaranteed without state aid,” said Spohr.

This article was originally posted on FX Empire

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