By Nick Brown
The bank's unexpectedly dovish guidance on interest rates overshadowed its statement that it aimed to wrap up its crisis-era stimulus programme, quantitative easing, at the end of this year.
The ECB now plans to reduce monthly asset purchases between October and December to 15 billion euros until the end of 2018 and then conclude the programme, though ECB President Mario Draghi stressed that the governing council stood ready "to adjust all its instruments as appropriate."
Investors, though, seized on comments indicating that interest rates would stay at record lows at least through the summer of 2019.
Some analysts believe it could be even longer.
"With Draghi's term of office due to expire at the end of October 2019, we feel the ECB is unlikely to start increasing interest rates until the new ECB president is firmly in place," said David Zahn, head of European fixed income for Franklin Templeton.
Ten-year government bond yields in Germany, the euro zone benchmark, fell around four basis points to 0.43 percent.
The euro, meanwhile, touched on its steepest one-day drop against the U.S. dollar since June of 2016, while the dollar accelerated to a two-week peak.
The euro was last down 1.37 percent to $1.1628, while the dollar index, which measures the greenback against six top currencies, rose 0.85 percent.
EQUITIES STRONG
European equities rose sharply after initial losses, with Wall Street creeping into positive territory.
The pan-European FTSEurofirst 300 index rose 1.40 percent, buoyed by big gains in interest rate-sensitive sectors like autos and utilities.
"The hawks had been guiding for a June hike before the [ECB] meeting and, given the clear guidance the ECB gave today on interest rates, it had to be priced out," said AFS Group analyst Arne Petimezas. "It doesn't seem like we're at the stage where the hawks are on top of things."
MSCI's gauge of stocks across the globe shed 0.05 percent, while Wall Street wavered, with two of the three main indexes up after better-than-expected May retail sales data.
The U.S. Commerce Department reported that retail sales rose 0.8 percent last month, the biggest advance since November 2017. Data for April was also revised upward.
The Dow Jones Industrial Average fell 7.94 points, or 0.03 percent, to 25,193.26, the S&P 500 gained 7.6 points, or 0.27 percent, to 2,783.23 and the Nasdaq Composite added 62.69 points, or 0.81 percent, to 7,758.39.
MSCI's broadest index of Asia-Pacific shares outside Japan closed 1.11 percent lower, while Japan's Nikkei lost 0.99 percent.
Benchmark 10-year U.S. Treasury notes last rose 8/32 in price to yield 2.9516 percent, from 2.979 percent late on Wednesday.
The 30-year bond last rose 21/32 in price to yield 3.0696 percent, from 3.102 percent Wednesday.
TRADE TENSIONS
One issue keeping investors in check was concern about U.S. threats to impose tariffs on $50 billion of Chinese goods. U.S. President Donald Trump was planning to meet with trade advisers later to decide whether to activate the tariffs, a senior administration official said on Wednesday.
CBOT corn and soybean futures were down sharply as uncertainty about tariffs and favorable crop weather in the U.S. Midwest have prompted funds to liquidate big long positions.
CBOT July corn fell to its lowest since mid-January and front-month soybeans dipped to a 9-1/2 month low. Traders are worries about China, Mexico and other countries curbing demand for U.S. grain and soy exports.
Another event markets were gearing up for: the start of soccer's World Cup in Russia, where time zone differences mean there will be more matches during European or U.S. and Latin American trading hours than any previous tournament.
A study done during the last World Cup with similarly-timed games, the 2010 finals in South Africa, showed trading volumes on share markets dropped by a third on average when matches were on and 55 percent when a market's own team played.
Oil prices were down, facing pressure from evidence of rising U.S. output and uncertainty over supply, before a meeting next week of the world's largest exporters.
U.S. crude fell 0.3 percent to $66.44 per barrel and Brent was last at $75.95, down 1.03 percent on the day.
(Additional reporting by Marc Jones, Danilo Masoni, Dhara Ranasinghe and Tommy Wilkes; Editing by Nick Zieminski)
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)