Most investors had priced in a bold increase in monthly purchases by the ECB under its QE programme. No wonder they showed utter dismay when confronted with a mere extension of the scheme until March 2017 plus pledges to buy sound local authorities’ issues. The slight reduction in the current negative rate imposed on overnight money placed by credit institutions in the central bank did little to raise market sentiment.
Expectations for Draghi’s second QE programme were running so high that, in the end, he disappointed the markets. Investors had bet on more aggressive stimuli, so the European stock exchanges tumbled over 3% at the close (having been in positive territory mid-morning). The euro jumped to over 1,09 dollars (its biggest rise since March) and European debt registered its largest increase so far this year.
Nick Malkoutzis via Macropolis | An average of around 2,200 refugees and migrants have arrived on the shores of Greece’s eastern Aegean islands every day this year. Before being piled into rubber dinghies and other unsuitable vessels for the crossing, they purchase life vests from shops in Turkey.
The market has already priced in that the ECB will adopt new monetary stimulus measures at tomorrow’s meeting, which in theory should boost growth and inflation in the eurozone. Analysts agree that more aggressive measures are necessary, but due care must be taken not to damage financial stability.
The Eurozone economic confidence index ticked up 2 percentage points in November from October to 109, according to the European Commission. This figure beat forecasts and is the highest level for the last four years.
Michael Wolgemuth, board member at Germany’s Konrad Adenauer Foundation thinks it will take time for there to be reconciliation eventually between creditors and debtors in the euro area. The key is to know and regulate what both parties need to take into account in the event of a state becoming insolvent.
The European Banking Authority (EBA) rectified the solvency figures for the Spanish banking sector. The regulatory authority has raised the average “fully-loaded” capital ratio at end-June to 10% from a previous 9%. This compares with the European sector average of 11.8%
James Alexander via Historinhas | In no other country in the euro zone is the public so intensely engaged with each monetary policy measures of the ECB as passionately as in Germany. This applies to the Bavarian public, which is particularly known for distinct opinions and clear announcements.
The markets are seemingly focusing on next week ECB’s meeting rather than on geopolitical events. Investors expect they will take new measures on expansionary monetary policy. Yesterday, ECB’s vice president Vitor Constancio, insisted again that the central bank will analyse those if needed to reach the inflation target of 2%.
