Spreadex Market Update
Damp squib Draghi disappoints DAX and co. with subpar stimulus extension
Instead of a steroid injection of quantitative easing, the Eurozone got a 10 basis points cut to the deposit rate (less than the 20 basis point cut hoped for) alongside a 6 month (and beyond, if needs be) extension to the current €60 billion a month asset purchase programme, taking the loose end point from September 2016 to March 2017. The main news, however, was what wasn’t in Draghi’s speech; with the markets already disappointed by the smaller than anticipated deposit rate cut the DAX and co. dove headfirst into the red when it transpired that the bulking up of the central bank’s purchasing power (with reports suggesting an increase to €75 million a month) wasn’t going to happen.
To make matter worse the ECB cut its inflation forecasts for 2016 and 2017 (even if it did raise its growth forecasts for 2015 and 2017), contributing to the overall gloomy tone after Draghi’s conference ended. At the day’s nadir the DAX fell by nearly 350 points, before settling into a steady 300 point loss; the CAC, meanwhile, haemorrhaged around 140 points. There was one major winner this afternoon, however; the previously death’s door-knocking euro surged as Draghi began to disappoint, touching the heady-heights of a 2.6% increase against the dollar before cooling to a still stellar 2%-plus rise.
Whilst Draghi dominated this Thursday, the US markets are set to take-back their crown tomorrow afternoon with an incredibly important non-farm Friday. First, however, they had to deal with some slightly less vital bits of data, with worse than expected jobless claims and Markit and ISM manufacturing figures contributing to the largely Eurozone-fuelled losses the Dow saw after the bell. Still to come is another chance for the markets to assess Janet Yellen’s hawkish following a seemingly pro-hike speech on Wednesday.
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