LONDON, Feb 26 (Reuters) - Euro zone money markets started to fully price in a December rate cut from the European Central Bank on Wednesday, as the spread of coronavirus outside of China pushed traders to ramp up stimulus expectations.
Eonia money market futures dated to the ECB’s December 10 meeting now show about 10 basis points of rate cuts being priced in, up from around 7.5 bps on Monday. That equates to around a full probability of a 10 bps cut from the bank.
Europe’s worst flare up yet of the virus in Italy has raised fears that its contracting economy could soon be thrown into another recession.
Asia reported hundreds of new coronavirus cases on Wednesday, including the first U.S. soldier to be infected, as the United States warned of an inevitable pandemic.
The probability of an ECB rate cut in July also rose significantly, to around a 70% chance from around 50% on Monday. (Reporting by Yoruk Bahceli; editing by Marc Jones)