Spreadex Market Update
Draghi in wait and see mode as ECB follows Bank of England’s inactive lead
There was nothing particularly new from an unflustered, if not particularly forthcoming, Mario Draghi this month, the central bank chief merely adding the Brexit to his usual list of downside risks (namely the slowdown in emerging markets and the glacial pace of structural reforms in the region) to the Eurozone economy without providing much insight into the referendum result’s actual impact. Overall Draghi and co. did little to change the perception that September is the likeliest time for any ECB action, something that will again be dependent on what steps the Bank of England takes in August.
On the topic of the Italian banking sector Draghi spoke positively about the use of public backstops for banks in extreme circumstances, but, in a responsibility-shifting move, stated that any such scheme would require agreement with the European Commission. The comments led to a 3% bounce for the likes of Deutsche Bank, though the DAX itself could only manage a meagre 0.1% rise. As for the FTSE the pound’s decent, if admittedly reduced, gains against both the euro and the dollar prevented the index from wandering too far away from 6700.
The US open failed to bring much excitement, the Dow Jones slipping by around 40 points to drift away from yesterday’s all-time highs. In terms of data the Philly Fed manufacturing index slipped to -2.9 against the 5.1 forecast, while jobless claims and existing home sales were both better than expected at 253k and 5.57 million respectively.
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