What to Watch: Volatile stocks, ECB decision, WPP crash

Here’s a daily overview of the top business and economic developments the Yahoo Finance UK team is monitoring in the UK and Europe:

Volatility in European stocks

European stock markets dropped sharply in early morning trading but then quickly rebounded by mid-morning.

France’s CAC 40 (^FCHI) fell by about 0.5% at the open but then did a complete turnaround and held onto gains above 1% in the early afternoon. It was the best-performing major index in Europe on Thursday.

The initial slump came after a late sell-off in the US on Wednesday and then a brutal session in Asia. Japan’s Nikkei (^N225) closed down 3.7% and the Hang Seng Index (^HSI) in Hong Kong lost 1%.

The Vix index (^VIX), which tracks US market volatility, spiked sharply over the past day.

European Central Bank announcement

The European Central Bank (ECB) announced Thursday afternoon that it would leave interest rates steady and would stick with plans to wind-down its stimulus programme by the end of the year.

The ECB is in the midst of ending its massive, multi-year stimulus programme at the end of December. The central bank has bought about €2.6 trillion worth of bonds and other assets as part of its so-called ‘quantitative easing programme’ to stimulate the eurozone economy and support inflation.

The eurozone economy has been improving in recent months, but ECB president Mario Draghi still issued warnings about various risks.

At a press conference, he reeled off what he called a “bunch of uncertainties” related to trade protectionism, emerging markets and financial market volatility.

He also called on eurozone countries to introduce reforms to help their domestic economies and increase their fiscal ‘buffers’. The comments seemed to be directed towards Italy, which has high levels of debt and budget-busting spending plans.

WPP stock crashes

Shares in WPP (WPP.L) crashed by as much as 21% on Thursday morning after the company cut its sales and profit forecasts.

The drop wiped about £2.8bn ($3.6bn) off WPP’s market capitalisation, taking the stock to a six-year low.

New boss Mark Read, who inherited the world’s biggest advertising group when its founder Martin Sorrell left abruptly in April, said WPP needed to sell assets and hold off on acquisitions.

With files from Yahoo Finance UK’s Oscar Williams-Grut and Reuters

Related news from the US:

What to watch in US markets on Thursday

Tesla reports surprise profit, stock surges

Microsoft earnings beat expectations, stock jumps