That Reuters trial balloon was right.

In an unexpected, to the conesnsus, announcement, Mario Draghi turned hawkish after all, and while the ECB kept all rates unchanged, it announced that it would effectively taper its bond purchases from €80 billion to €60 billion starting in April 2017 until the end of the year: “From April 2017, the net asset purchases are intended to continue at a monthly pace of €60 billion until the end of December 2017, or beyond, if necessary, and in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its inflation aim.”

However, the ECB hedged, and also added that “if the outlook becomes less favourable or if financial conditions become inconsistent with further progress towards a sustained adjustment of the path of inflation, the Governing Council intends to increase the programme in terms of size and/or duration.”

So tapering, but conditional on the market not falling apart; should risk return, the ECB will return to the familiar program of €80 billion per month, or more.

Additionally the ECB suggested that it will address bond scarcity and expand the scope of eligible bonds, saying that “to ensure the continued smooth implementation of the Eurosystem’s asset purchases, the Governing Council decided to change some of the parameters of the APP, which will be communicated at today’s press conference and in a separate press release.”

Full press release:

Monetary Policy Decisions

 

At today’s meeting the Governing Council of the ECB decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.00%, 0.25% and -0.40% respectively. The Governing Council continues to expect the key ECB interest rates to remain at present or lower levels for an extended period of time, and well past the horizon of the net asset purchases.

 

Regarding non-standard monetary policy measures, the Governing Council decided to continue its purchases under the asset purchase programme (APP) at the current monthly pace of €80 billion until the end of March 2017. From April 2017, the net asset purchases are intended to continue at a monthly pace of €60 billion until the end of December 2017, or beyond, if necessary, and in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its inflation aim. If, in the meantime, the outlook becomes less favourable or if financial conditions become inconsistent with further progress towards a sustained adjustment of the path of inflation, the Governing Council intends to increase the programme in terms of size and/or duration. The net purchases will be made alongside reinvestments of the principal payments from maturing securities purchased under the APP.

 

To ensure the continued smooth implementation of the Eurosystem’s asset purchases, the Governing Council decided to change some of the parameters of the APP, which will be communicated at today’s press conference and in a separate press release.

 

The President of the ECB will comment on the considerations underlying these decisions at a press conference starting at 14:30 CET today.

• Draghi Expected to Lay Out Plans for More ECB Stimulus (WSJ)
• Bonds Fall as Investors Turn Wary on ECB Stimulus; Euro Gains (BBG)
• European Stock Traders Look to Draghi to Break Santa Curse  (BBG)
• Trump to nominate Pruitt to lead U.S. environmental agency (Reuters)
• Trump’s choice of China envoy a positive sign for ties, Xinhua says (Reuters)
• Syrian Rebels Pin Hopes on Trump (WSJ)
• Trump Pick of EPA Foe to Lead Agency May Spark Senate Fight  (BBG)
• Russia Sells Stake in Oil Giant Rosneft to Glencore, Qatar (WSJ)
• The Return of Glencore’s Dealmaking King (Bloomberg)
• Italian bank Intesa to help fund Rosneft deal for Glencore and Qatar (Reuters)
• Sovereign-Wealth Funds Buy Stake in U.K. Gas Business (WSJ)
• Monte Paschi Seeks ECB Reprieve as It Tries to Escape Bailout (BBG)
• Vietnam dredging on South China Sea reef (Reuters)
• Deutsche Bank May Have Rigged Index in Paschi Deal, Audit Shows (BBG)
• Eyeing upswing, more U.S. oilfield service firms restructure (Reuters)
• Michael Jordan Scores China Legal Victory for His Chinese Name  (BBG)
• How Trump’s Web of Businesses Obscures Potential Conflicts (WSJ)
• Facebook’s Investors Criticize Marc Andreessen for Conflict of Interest (BBG)
• Merkel Sticks to Middle Ground in Risky Pitch for German Votes  (BBG)
• China’s Banks Are Hiding More Than $2 Trillion in Loans (WSJ)
• Facebook’s Investors Criticize Marc Andreessen for Conflict of Interest  (BBG)

Overnight Media Digest

WSJ

– U.S. stocks posted their biggest rally since the election, sending major indexes to fresh records as investors increasingly conclude President-elect Donald Trump will be good for business and the economy. http://on.wsj.com/2h8mFLj

– The CEOs of AT&T Inc and Time Warner Inc on Wednesday defended their proposed $85 billion merger to lawmakers, trying to navigate a tricky political landscape in which President-elect Donald Trump has expressed hostility to the deal. http://on.wsj.com/2hjV7yR

– President-elect Donald Trump on Wednesday chose Oklahoma Attorney General Scott Pruitt to lead the Environmental Protection Agency, according to a transition official, turning to a climate-change skeptic and sharp critic of the agency to take its helm. http://on.wsj.com/2gbVAae

– Rampant use of an accounting sleight of hand means Chinese banks don’t have to set aside capital to cover potential losses, sowing fears of a crisis. http://on.wsj.com/2hkJhV0

– President-elect Donald Trump turned to a third retired military officer to help him run the country when he takes office in January, a move that represents an unusual level of military influence in the executive branch. http://on.wsj.com/2hlLn7r

– Passage of legislation aimed at speeding up Food and Drug Administration approvals, combined with an incoming president who has pledged to “cut red tape” at the agency, is expected to usher in a new, more industry-friendly era of drug and device regulation. http://on.wsj.com/2h7fbbb

– Syrian rebels on Wednesday proposed a civilian evacuation and negotiations over the future of Aleppo, a stark admission the opposition is all but defeated in a divided city seen as a bellwether in the country’s nearly six-year war. http://on.wsj.com/2gb850P

NYT

– The Russian government announced Wednesday that it will sell nearly 20 percent of its state oil company, Rosneft , to Swiss commodity trading firm Glencore and the sovereign wealth fund of Qatar. http://nyti.ms/2h8jqDt

– City Council in Portland in Oregon voted on Wednesday to impose a surtax on companies whose chief executives earn more than 100 times the median pay of their rank-and-file workers. The surcharge, which Portland officials said is the first in the nation linked to chief executives’ pay, would be added to the city’s business tax for those companies that exceed the pay threshold. http://nyti.ms/2h8kS90

– The European Central Bank is expected to say on Thursday that it will buy large quantities of government bonds and other assets for longer than initially planned, an attempt to protect the eurozone economy from an increasingly unpredictable political landscape. http://nyti.ms/2h8brWU

– China’s highest court ruled largely in favor of former basketball star Michael Jordan on Thursday in a closely watched trademark case. The decision held that Jordan owns the legal rights to the Chinese characters of the equivalent of his name, overturning a lower-court ruling. The lawsuit pitted Jordan against Qiaodan Sports Company, which he accused of using the Mandarin transliteration of his name on its goods. http://nyti.ms/2h8kN5j

– President-elect Donald Trump is considering formally turning over the operational responsibility for his real estate company to his two adult sons, but he intends to keep a stake in the business and resist calls to divest, according to several people briefed on the discussions. http://nyti.ms/2h8fgLI

Canada

THE GLOBE AND MAIL

** The civil servant in charge of the government’s spy-watchdog agency says Canada may have to reconsider how it shares intelligence with the United States if president-elect Donald Trump makes good on his promise to torture terrorists to gather intelligence. https://tgam.ca/2h6uqyd

** Chicago-based PrivateBancorp Inc. is postponing the shareholder vote for its $4.9-billion sale to Canadian Imperial Bank of Commerce, raising questions about whether CIBC will have to sweeten its bid next year. https://tgam.ca/2h6tkCy

** Canada is set to overhaul the way financial transactions are processed as changing technology and globalization reshapes the way individuals and businesses move money and access their funds. https://tgam.ca/2h6weYc

NATIONAL POST

** Ontario officials said the province’s own land-use restrictions around its largest city have constrained the supply of detached homes. http://bit.ly/2h6wO88

** A major international union has taken the first step towards unionizing pilots at WestJet Airlines Ltd, taking over the work begun internally last year. http://bit.ly/2h6nJw6