Spreadex Market Update
Draghi gets a German grilling as FTSE and DAX continue to fall this Thursday afternoon
Unsurprisingly leaving interest rates at zero, Draghi stated that he expects rates to remain at present or, crucially, ‘lower' levels for an 'extended period of time’, whilst also warning that inflation may once again turn negative in the short term. The ECB president also claimed that negative interest rates have had a relatively positive effect without producing the damaging side effects their critics often point to (i.e. lower profitability for banks or ramifications for customers), whilst confirming that ‘helicopter’ money hadn’t been discussed in this month’s meeting.
However, the meat of Draghi’s press conference came not from his prepared statement but the questions that followed. The antagonism between the ECB President and his German critics was clear to see, the Italian fielding questions on German pensions, his relationship with Wolfgang Schauble and accusations that the central bank’s monetary policy has fuelled euro-sceptic parties in the country. In response Draghi was keen to assert the ECB’s independence, warning of the effect it would have on the Eurozone’s recovery if its autonomy was to be undermined, whilst also reminding Germany that the central bank sets the agenda for the region as a whole, not just its economic powerhouse.
The rather testy tone of the post-statement questions, combined with the lack of real comment any future stimulus, likely explains the state of the Eurozone indices, the DAX and CAC both falling by 0.6% as the afternoon continued. The FTSE, meanwhile, slipped by nearly 1% as investors continued to process the morning’s disappointing data, whilst the Dow Jones opened around 40 points lower as the Philly Fed manufacturing index unexpectedly plunged back into negative territory.
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