UPDATE 1-Euro, bond yields fall further, ECB head Lagarde's tone seen as dovish

(Adds context, quotes and chart)
By Yoruk Bahceli
LONDON, Jan 23 (Reuters) - The euro fell to a six-week low
and German bond yields dropped to their lowest in two weeks on
Thursday after European Central Bank President Christine Lagarde
struck a slightly more dovish tone than some had expected during
her press conference.
The moves were small, however, and also broadly tracked
global markets where investors sold stocks and bought safe-haven
assets such as the yen and government bonds amid growing fears
about the spread of a respiratory virus from China.
New cases in Singapore and Saudi Arabia are rekindling
memories of a similar 2002-2003 outbreak that dented economic
growth.
But the bond rally accelerated after the ECB made no changes
to policy and Lagarde told the news conference that risks to
growth in the euro zone remained tilted to the downside. She
said however the bias had become less pronounced as uncertainty
around international trade recedes.
Germany's 10-year bond yield, already down on the day,
extended its fall and was down 5 basis points on the day to
-0.304% after the ECB news conference, the lowest in over two
weeks.
Italian government bond yields also fell further and were
down 8 bps for their biggest tumble in over a month. IT10YT=RR
In recent weeks, economists have been encouraged by positive
data readings to believe that euro zone economic activity has
bottomed out. But Antoine Bouvet, senior rates strategist at
ING, said market expectations had likely been of a more upbeat
assessment of the economy.
Lagarde had "declined on a few occasions to distance herself
from negative interest rates," he added.
Shares in euro zone banks turned lower after an initial rise
as investors interpreted Lagarde's comments to mean 'lower for
longer' interest rates -- damaging for banks' profit margins --
would continue in the foreseeable future.
The banking index slumped 1.1% to 1-1/2 month low .SX7P .
The euro fell back to $1.1059 EUR=EBS , down 0.3% and its
weakest since Dec. 9.
"The euro is not about to receive support from ECB policy
any time soon," Nordea analysts told clients.
The ECB also launched its well-anticipated strategic review,
which Lagarde said was likely to take about a year, although she
hinted it could take longer.
She declined to comment on what changes she might favour to
the inflation target, but promised to "not leave any stone
unturned".
Some investors appeared disappointed with the meeting and
the strategy review announcement. "Today's meeting was expected to be the hors d'oeuvre of the
ECB's policy review. In reality it was more akin to the
notification that ECB would be cooking dinner," said Andrew
Mulliner, portfolio manager at Janus Henderson.

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Euro zone markets react to ECB news conference https://tmsnrt.rs/2tK6QCK
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