At Bankinter, analysts expect markets to register a further downward move in the coming weeks. In fact, they believe that markets right now
“are probably too excited by the prospects of a coordinated and positive outcome for the euro zone. In reality, the only tangible factor one could be led by to optimism is the fact that the ECB has some unconventional measures taken, but these are not decisive in solving problems. In our opinion, the actions of the BoE and the ECB are but a part of the preparatory and stabilizing measures for the default of Greece, an event that has not been diminished in the least.
“As a matter of fact, Trichet pronounced on Thursday words of support for Ireland and yet, when asked about Greece, he said nothing. In this case, no news is to be interpreted as bad news. It may happen that a coordinated plan to recapitalize European banks at a large sca
le is being prepared, but this would be just another of the stabilization measures before the Greek default, not to avoid it, in our opinion.
“Thursday's trading session was very erratic due to the expectations generated by the meetings of EBA, BoE, ECB and the European multilateral (ECB-WB-IMF-OECD-EC). The EBA said it will not carry out another stress test with more stringent criteria; the BoE increased its asset purchase program (£275bn vs. £200bn) and the ECB did not lower rates, although it introduced unconventional measures to try to compensate this (we feel they won't).
The trouble is that Trichet has greatly limited Draghi's (who will replace him starting on Nov. 1) maneuverability. Trichet made it clear that the rate policy has the purpose of controlling inflation when it is above target. We think that what we saw yesterday is not as good as the markets say.”
