Expand / Just a month ago since the European Central Bank announced a plan rate cuts, bank loans and debt purchases that exceeded market expectations. However, it is seen that markets do not dance to the ECB.
The part where there has been a marked improvement has been related to corporate debt markets. That makes sense, since the ECB plan to buy corporate debt was a big surprise. But otherwise, the results have been very positive. The Stoxx Europe 600 has fallen 2.6% since ECB President Mario Draghi, announced new measures.
European banks have fallen by 10.2%. The debt of southern Europe has also seen a worse outcome than expected and the spread between the yield on Spanish bonds and German ten years has risen from 1.33 to 1.47 percentage points. In addition, the euro has continued to rise since the March ECB meeting: specifically, 3.6% against the dollar and 4.5% against the pound; although in terms weighted oscillation is smaller, the single currency is still 1.8% higher than the dollar.
This evolution is not a good news. At its March meeting, the ECB spoke of the problem of adjusting the financial conditions for the euro’s appreciation and falling stocks. And although the company is now focusing on the credit channel as a way to boost the economy, the euro continues to have a vital importance. Its revaluation has occurred in part because real interest rates in other countries have fallen. Specifically, in the US, due in part to the conciliatory tone of the Federal Reserve. In the euro area, inflation expectations remain stalled.
Perhaps the biggest challenge for the ECB is that economists have already begun to discuss the possibility of direct injections of liquidity into the economy. You can question the last topic that has become a trend, since for now not expected to materialize this possibility. However, the debate also highlights the magnitude of the challenge facing the ECB against the markets.
Read the original article in The Wall Street Journal How Fickle Markets Are Challenging ECB’s Mario Draghi
More information www.europe.wsj.com
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SPAIN: Markets tested Mario Draghi
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