By Tom Fairless

FRANKFURT--The eurozone faces a "highly uncertain" economic fallout from U.S. elections, the European Central Bank said on Thursday, warning that expected U.S. policy changes could trigger global asset-price corrections.

Economic policies introduced by President-elect Donald Trump "will likely become more inward-oriented," and the U.S. fiscal deficit may grow as a result of tax reductions and increased infrastructure and defense spending, the ECB wrote in its biannual Financial Stability Review.

"In such a scenario, the euro area economy may be impacted via trade channels and by possible spillover effects from higher interest and inflation rate expectations in the United States," the ECB said.

Global asset prices may also be affected by other political events in advanced economies, and continued fragility in emerging markets, the ECB said.

The Frankfurt-based central bank warned of "significant" vulnerabilities in the eurozone's banking sector, stemming from low profitability and a high stock of non-performing loans.

Still, a recent rise in bond yields "may provide some support for euro area banks' profitability prospects," the ECB said.

Write to Tom Fairless at tom.fairless@wsj.com

(END) Dow Jones Newswires

November 24, 2016 04:14 ET (09:14 GMT)

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