Morning Bid: ECB may stumble into stimulus

(Opinions expressed are those of the author.)

By Mike Dolan

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World markets are entering March with Friday's alarming Oval Office row reverberating on both sides of the Atlantic, raising more questions about increasingly unpredictable geopolitics just as investors are also turning anxious about a potential economic slowdown.

Tuesday's U.S. tariff deadline, labor market updates and China's National People's Congress will all jockey for attention this week. But I'll delve into the European Central Bank's likely interest rate cut on Thursday for today's spotlight.

TODAY'S MARKET MINUTE

* European leaders including the UK have joined forces todraft a peace plan for Ukraine to present to Trump * Bitcoin has surged more than 20% from last week's lows,along with several other cryptocurrencies after Trump hints atthe creation of a new U.S. strategic reserve. * U.S. House Speaker Mike Johnson says he wants a "clean"stopgap funding measure to keep federal agencies operating. * Commerce Secretary Howard Lutnick says tariffs on Canadaand Mexico will go into effect tomorrow, but Trump willdetermine whether to stick with the planned 25% level. * Parties in talks to form Germany's new government areconsidering quickly setting up two special funds - potentiallyworth around 400 billion euros ($415 billion) for defence and400 billion to 500 billion euros for infrastructure, ⁠sourcestold Reuters.

ECB MAY FEAR STUMBLING INTO STIMULUS

Few doubt the European Central Bank will cut interest rates again this Thursday, but there are fears in the ECB ranks that easing much further after that may see it inadvertently stumble into stimulative territory before inflation has been licked.

And pity the poor central banker trying to work it out.

Much like its peers around the world, the ECB is due to review policy again and issue a series of long-term forecasts even though it barely knows what the economic or political backdrop will be next month.

Uncertainty about potential U.S. tariffs, the identity of the new German government, the fate of Ukraine and a likely new public spending boost to re-arm the continent are all fogging up ECB eyeglasses considerably.

As it would probably admit itself, staff forecasts at this juncture are little more than a finger in the wind.