Once again, Mario Draghi, President of the European Central Bank is living up to its nickname “Super Mario”. In 2012, stabilized markets its promise to do “whatever it takes” to save the euro. This year, he has made a trick similar to adopt quantitative easing, printing money to buy assets. This week, the ECB started buying government bonds, having been snatching asset-backed securities and covered bonds.
The announcement of quantitative easing in late January helped revive investor sentiment after a difficult start to the year. World stock markets rose by 5.3 percent in February, according to Standard & amp; Poor’s, with four in the euro area –Austria, Greece, Ireland and Portugal– which recorded double-digit gains.
Relief
looser monetary policy is not the only factor behind the recovery. Investors were relieved when Greece and its creditors agreed to a four-month extension of its lending program. That reduced the risk of a Greek exit from the eurozone, although the financial health of Greece remains poor.
The significant drop in oil prices has acted as a tax for European consumers intensifying hopes that the continent’s economy is escaping depression. The economic surprise index Citigroup for the euro area, which reflects whether the data were below or above expectations, has jumped from -57.3 to +49.5 mid-October to March 9. The ECB has raised its growth forecast for the current year from 1 percent to 1.5 percent, and the Organization for Economic Cooperation and Development are “tentative signs of positive change in the momentum of growth in the euro area”.
No one expects the kind of growth that would envy the Chinese. However, recent data arising in the context of years of constant pessimism as investors seemed to doubt that the eurozone would grow again.
Rebound
Additional positive news has come from the European banking sector. Since 2008, banks have focused more on strengthening their balance sheets than paying companies. This credit crunch was bad for growth, but things have picked up. The broad measure of money supply, known as M3, grew by 4.1 percent in the year ended in January, while 12 months before the annual growth rate was only 1.2 percent. A narrower measure, known as M1, confirms the trend growth has risen from 6.2 percent and 9 percent during the same period
The big companies have also been able to take advantage of low yields in the markets. Europe bond. The ECB has played a role here too: investors have anticipated the launch of quantitative easing by significantly lower yields on government bonds. Yields on two-year bonds in France, Germany and the Netherlands, among others, are negative. The yield on 10-year bonds in Germany is only 0.23 percent, which means that it has replaced Japan as the debtor lowest cost in the world.
Hunting
That has made investors who are on the hunt for yields are released on corporate debt. The yield on the bonds of Nestlé, a Swiss food group, has also become negative. European companies have not been alone in taking advantage: in the first two months of 2015, US companies issued more than 19,000 billion of debt denominated in euros, an increase of 160 percent over the same period in 2014.
Only Coca-Cola sold 9,000 million of these bonds. Investors had 21,000 million in orders from them, even though the company was offering yields of only 1.65 percent on 20-year bonds.
The rest of the world may not be as positive about another consequence ECB action, the sharp fall in the euro. It fell below $ 1.06 on March 11, its lowest level since early 2003. That’s not just a matter of weak euro: the dollar was also up against the yen as investors anticipate later this year The Federal Reserve will announce the first rate hike since the financial crisis. The dollar is now at its highest level against major currencies, in commercial terms, since 2003.
attentive Markets
Interest • The decisions of the Federal Reserve of the United States imports to exporters in the country.
Although its trade deficit continues to benefit from growing domestic production of oil and shale gas, the non-oil trade deficit US was nearly 50,000 million in January, more than 10,000 million over the same month last year. The profits of US companies suffer when foreign income are translated into dollars. Estimates of earnings growth this year have been revised downwards from 9.1 percent to 2.1 percent in recent months
If it is expected that the European QE is positive for the world, rather than only for the euro area, then it has to revive demand, not merely take market share in the name of exporting the continent. The example of Japan’s quantitative easing is rather irregular in this area: three of the last five quarters have seen a decline in economic activity, although the effect is clouded by an increase in the consumption tax
<. p> Investors clearly have faith that the plan “Super Mario” work best.
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