The wind of European economic recovery slows, but Mario Draghi seems ready to plug in the AC and increase its potency. The latest macroeconomic data in the euro area paint a gray picture, but investors hope that the European Central Bank (ECB) to take unconventional measures that serve to sustain the fragile recovery.
The president of the organization fueled these expectations with his speech last Friday, with markets closed in the Old Continent, in the meeting of central bankers in Jackson Hole. Today, therefore, is the first day that European investors may interpret the words of Draghi. The intervention of the central banker has allowed spectacular stock hikes across Europe, new lows on the profitability of sovereign debt and the depreciation of the euro below $ 1.32.
The Dow has soared 1.81% at the end and has been at the gates of 11,700 points, exactly the 11690.1. Absolutely all of the selective values have concluded the session in positive and increases in the stock markets of the Old Continent have also been strong, up from 1.5% in the Footsie British, the French CAC and the German Dax.
From the analytical department of Bankinter define the attitude of investors as befitting a scenario that always believe will benefit. “If the data is weak macro discounted the stock up because that will be more accommodative monetary policy, and if you are strong, a positive reading is also made to be discounted an improvement in the economy.”
Mario Draghi He was willing to approve new stimulus measures if the economic recovery in the euro area continue to weaken. ECB President was more concerned than in the past talked about inflation and a deterioration in the inflation outlook to five years, an indicator seldom used and reflects the increased concern about the evolution of prices in the area euro. This week, on Friday, August inflation data, the market believes it will stay at 0.3%, thereby encouraging the specter of deflation know.
Barclays experts believe that Draghi’s speech “represents a turning point in the official language of the ECB to say that the current situation requires action on both sides of the economy (supply and demand) . Possibly this is the first time a president of the ECB argues that it is necessary to stimulate demand. ” The central banker also talked about fiscal policy in the euro area, to demand greater coordination in the region, thereby implicitly, say from Barclays that “some countries may take a more expansionary policy (in particular Germany)”. Furthermore, Draghi “endorsed the idea of a European budget to finance a comprehensive program of public investment.”
“If the ECB decides to wait to see the effect of TLTRO, I think the market is not so take it well, because what is a discount now asset purchase program and, at least, to be announced before the end of the year, “said Nuria Alvarez, analyst at Renta 4 In this sense, José Luis Martinez Campuzano Citi chief in Spain, believes that “it seems increasingly clear that the ECB will have instrumentalized new measures, but in this case the Credit Facility, as would be an asset purchase program. We favor a 60% public role and 40% private. Before the end of the year. “
Draghi’s words allowed in the Stock Upgrades and new lows in the interest of sovereign bonds in the secondary debt market. The yield on Spanish ten-year bond has concluded a record low of 2.26%; Italian at 2.47%; and Germany, to 0.95%. The possibility that the ECB adopt a program of asset purchases allows this decline in profitability (price increase) of sovereign Deuba. All Ibex without exception, significant progress was noted.
Investors tiptoe by the German Ifo index of economic sentiment in the country. This has been on 106.3 points in August, down from the 107 expected by economists surveyed by Bloomberg. The expectations have also fallen, to 101.7 points from 103.4, compared to 102.1 estimates.
Meanwhile, across the Atlantic has known a flood of economic data with light and shadow. The Activity Index Chicago Fed, a foretaste of the economic movement across the country, rose in July to 0.39 points above the expected 0.20. The August PMI index fell 58.5 points, compared to the 58 estimates, and as slightly negative data, it has been known that the number of new home sales in July fell by 2.4% in July, compared with 5 8% expected.
indexes on Wall Street have responded very positively to the situation in the European markets, celebrating the eventual debt purchases by the ECB and also macroeconomic data from the United States. The Standard & amp; Poor’s again beat his world record, even surpassing the legendary level of 2,000 points at the close of trading in Europe. The Nasdaq is also very close to historical highs above 5,000 points for the time of the dotcom bubble, back in March 2000
In the currency market, the impact of possible new steps towards a more expansionary monetary policy by the ECB also be felt. The euro is trading at $ 1.32, a level that has got to lose at some point in the meeting and representing at least since September. Miguel Angel Paz, director of Unicorp management unit, believes that “the next clear level of support is at the 1,275 area, minimum last year. A priori, we understand that these would be the levels at which the ECB find convenient because both times you drilled down the area of $ 1.25 per euro, Mario Draghi forced to act to defend our currency. “
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